ZERO income tax

51 percent of Americans pay ZERO income tax!!!

Our Marginal tax rate is roughly 51% of our paycheck.
This is true for many people, not everyone of course.
Some only 20% of their paycheck.

How can these both be true?

“OUR Marginal tax rate”?

You got a mouse in your pocket?

Haha it’s the same for everyone in my income bracket. I’m talking about the amount that is taken from our paychecks. Assuming we all have the same numbers of dependents.

That’s going to go on my list of “most ridiculous assumptions of the 2010s.”

I fully expect that, come 2020, it will still be in the top 5.

There are a lot of children, elderly, unemployed, stay at home moms, disabled, and so on.

If you’re making low wages, you’re paying social security tax and medicare, but you probably won’t be paying much if any income taxes, because you’re paying a low marginal rate, get lots of deductions and get the EIC.

People who make low wages still pay social security tax, medicare, sales tax, property tax, excise tax, fees and tolls, and so on.

And your “marginal rate” only applies to the top bracket of your income. You may be paying a 28% marginal rate, but you don’t pay that rate on every dollar of your income. You’re not paying 51% of your income in income tax, even if the top marginal rate was 51%, which it is not.

First, there’s no way you’re paying 51% income tax. The top marginal rate is 35%, and that’s only for income above $400k. Someone making $500k will have a ~30% effective tax rate WITHOUT any deductions.

Now, how do people pay no income tax? Median personal income is ~40k. Standard deduction is $5.8k, personal exemption is $3.7k. Throw in a few more deductions and exemptions, that leaves the median taxable income at ~30k. Total income tax due is $4k. Now, take off the tax credits. Per child tax credit is $1k. The individual tax payer with a median income and 4 kids thus pays zero tax. At lower incomes, the earned income tax credit kicks in for taxpayers with kids, so someone with ~30k gross income and two kids also ends up paying around zero.

Ta-da, it’s because child tax credits are very significant at or below the median income.

Republicans love that statistic, but it’s so so so misleading.

  1. That “51% of americans pay no income tax” includes people who have no income – the unemployed, students, house wives without a job, and so on. OF COURSE you’re going to pay 0% income tax when you have $0 income. How else could it be?
  2. Income tax is only one part of taxes, and not even the largest. There’s also the payroll tax (which funds social security, medicare, etc) and that actually raises more money that income tax. EVERYONE with a job pays payroll tax, no exceptions. Ditto with sales taxes, which are up to 10% in some states. Ditto with lots of other taxes (property taxes, fees for driver’s licenses, and so on). All those other types of taxes (especially the payroll tax) affect lower income people far more than upper income people, so their effective tax rate (not just income tax, but total tax paid as a percentage of their income) is comparable to anyone else’s.
  3. The income tax system is set up with progressive tax brackets for a reason – someone in poverty earning $15,000 a year is struggling for every penny, and having to pay even 1% income tax makes the difference between being able to afford food or not; so we set a poverty threshold below which income tax doesn’t apply. You think the guy on $15,000 is somehow mooching off the rest of us because he doesn’t have to pay income tax (although he does still pays payroll tax and sales tax)? Well, OK, if you call that mooching, fine. But YOU try living on $15,000 a year (Income tax free!!!) and see if it’s the “living easy on the hard work of others” lifestyle that republican presidential candidates make it sound like.

And finally:
4) On a personal note, I work at a hedge fund owned by a billionaire, who is something like the #200th richest man in the world. He has a sweet tax setup where his personal income is paid in the form of interest-free loans from the company rather than salary, which lets him defer his taxes for years. So last year, my billionaire boss was one of the 51% of americans who paid 0 income tax. (Technically he’ll have to pay tax on that money eventually, but this lets him tax-defer it for as long as he wants, letting it grow tax free for years). But I never hear republican presidential candidates talking about hedge fund managers who pay 0 taxes. They always seem to focus only on the guy who has no income.

Isn’t the top marginal tax rate 35%?

Also I don’t think you understand what a “marginal tax rate” is. “Marginal” means it’s the rate that applies to every dollar you make above a certain amount. It’s never a percentage of the whole paycheck.

Did you happen to notice that your Poltifact cite explains how this is true, with the same explanation about FICA, sales and other taxes paid by all wage earners? So what didn’t that article explain to you?

Along with everything else that’s been said in this thread, I’d like to add this.

From the Politifact article:

Just what, if anything, is being glossed over by “tax unit” versus “households”? Is it a distinction with no practical difference, or does it make a big difference? I have no idea.

very nice!

I think each “tax unit” is either a taxpayer filing an individual return, or two married taxpayers filing jointly. It’s not quite the same as “households” since that can include several taxpayers. For example, extended families living together, so that kids and parents and grandparents are all filing separate tax returns. But, most of the time, one household files one tax return.

Yes, the top bracket is 35%. SSFICA is 15%. Don’t forget state taxes.


I know what marginal taxes mean.

Yes, the article in my link explains it. I would like a shorter explanation.
You can do that in 2 words: SS/FICA.

From Breaking Down the ‘Half Pay No Taxes’ Myth

From Yes, 47% of Households Owe No Taxes. Look Closer. (2010)

From Rick Perry: Middle Income Americans Don’t Pay Enough Income Taxes

:dubious: The math still isn’t adding up. You claim to be in the top tax bracket. Your effective income tax will be about 30% unless you have many millions in income. FICA is 15% (including the employer’s side, so it’s not something you see on a pay stub) but only on the first ~100k. And state income tax is typically 5-7% or so, with a few high-tax states like Hawaii topping out at 11% for the highest bracket.

So… assuming you make $500k, not very far into the top bracket, FICA is only 3% of your income. 3% FICA + 30% effective federal income tax + ~10% highest possible effective state income tax = 43%. Or, if you’re in a more typical state, 38%.

Again, how the hell are you paying 51%?

What does FICA have to do with people that pay no income tax? Really, the short explanation is thus: There are a lot of people that have no income (students, retirees, housewives, unemployed) so they pay zero income tax. People with poverty level income pay no income tax. Poor families with children get tax credits and pay no income tax. But those two latter groups are still paying 15% FICA on their entire income. If you are including FICA as “income tax”, then nobody with income is paying zero “income tax”.

I’m not saying I pay 51%, come tax time, not even on the last dollar. You can argue that I don’t pay SS/FICA after April or whatever. I just know this:

When I get a raise, or work an extra hour, I see less than 1/2 of that when I cash my paycheck. Those are the facts.

I’m including the employers contribution to SS/FICA.
All my coworkers are in the same boat.

Clearly, you don’t.

No one ever pays 35% of their income in Federal Income taxes. Even ignoring deductions and tax credits (everyone has them, and those with high incomes have far more opportunity to claim them), it is mathematically impossible with any finite income number.

Note, too, that many of those in the top brackets get a lot of their income from capital gains, which are taxed at 15%. That’s why Mitt Romney and Warren Buffet pay about 15% of their income in taxes.