Every household pays taxes, new report finds

Every household pays taxes, new report finds

- in Must Reads

Every household pays taxes, even the poorest fifth of American households, according to a new report.

The Budget and Tax Center, a project of the North Carolina Justice Center, released a report Wednesday addressing the renewed discussion of who exactly pays taxes. The discussion of who pays taxes – particularly federal income taxes – is significant in light of upcoming federal decisions regarding the Bush tax cuts, which expire on December 31, and upcoming state efforts to reform North Carolina’s revenue system.

While approximately 46 percent of Americans did not pay federal income tax last year, the report said, they contributed to the collective investment through federal payroll, state and local taxes. Of those that do not pay federal income tax, two-thirds paid payroll taxes; of those that did not pay payroll taxes, 22 percent were seniors and 17 percent were students, people with disabilities, and individuals who had lost their jobs.

The report finds that even the lowest 20 percent of Americans pay an average of 16 percent of their total income in federal, state, and local taxes. The wealthiest 1 percent – with annual incomes averaging more than $1.3 million – paid less than one-third or 30.7 percent of their incomes in total taxes in 2009. Comparatively, in 1972 the wealthiest 1 percent paid more than 42 percent of their income in federal taxes alone, the report finds.

Even if Congress lets the Bush tax cuts for the wealthiest Americans expire at the end of 2012, the report points out, they would still pay lower tax rates than they have for most of the last half-century.

“The statistics demonstrate that the wealthiest households — not the middle and working classes — have benefited disproportionately from the economic and tax policies pursued by the country’s political leaders during the past three decades,” the report said. “It is critical that tax rate decisions made at the state and national level be based on the reality that everyone pays taxes and the principle that both the federal and state tax system should be based on ability to pay.”

The full BTC report can be found at this link