# ZERO income tax
**URL:** https://boards.straightdope.com/t/zero-income-tax/612527
**Category:** Great Debates
**Created:** [February 11, 2012, 4:32pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527 "2012-02-11T16:32:21Z")
**Posts on this page:** 20
**Page:** 1
### Author:  [@sbright33](https://boards.straightdope.com/u/sbright33)
#### Post date: [February 11, 2012, 4:32pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/1 "2012-02-11T16:32:21Z")
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?
> **[PolitiFact - John Cornyn says 51 percent of American households pay no income...](https://www.politifact.com/factchecks/2011/jul/08/john-cornyn/john-cornyn-says-51-percent-american-households-pa/)**
>
> In a July 7, 2011, floor speech, Sen. John Cornyn, R-Texas, offered a striking statistic about how few American househol
> **[Tax rate](https://en.wikipedia.org/wiki/Tax_rate)**
>
> In a tax system, the tax rate is the ratio (usually expressed as a percentage) at which a business or person is taxed. There are several methods used to present a tax rate: statutory, average, marginal, and effective. These rates can also be presented using different definitions applied to a tax base: inclusive and exclusive.
> A statutory tax rate is the legally imposed rate. An income tax could have multiple statutory rates for different income levels, where a sales tax may have a flat statut...
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### Author:  [@kaylasdad99](https://boards.straightdope.com/u/kaylasdad99)
#### Post date: [February 11, 2012, 4:39pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/2 "2012-02-11T16:39:48Z")
“OUR Marginal tax rate”?
You got a mouse in your pocket?
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### Author:  [@sbright33](https://boards.straightdope.com/u/sbright33)
#### Post date: [February 11, 2012, 4:43pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/3 "2012-02-11T16:43:47Z")
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.
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### Author:  [@KneadToKnow](https://boards.straightdope.com/u/KneadToKnow)
#### Post date: [February 11, 2012, 4:45pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/4 "2012-02-11T16:45:38Z")
> [@sbright33](#):
>
> 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.
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### Author:  [@Lemur866](https://boards.straightdope.com/u/Lemur866)
#### Post date: [February 11, 2012, 4:54pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/5 "2012-02-11T16:54:42Z")
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.
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### Author:  [@lazybratsche](https://boards.straightdope.com/u/lazybratsche)
#### Post date: [February 11, 2012, 5:05pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/6 "2012-02-11T17:05:32Z")
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.
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### Author:  [@doubled](https://boards.straightdope.com/u/doubled)
#### Post date: [February 11, 2012, 5:06pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/7 "2012-02-11T17:06:40Z")
> [@sbright33](#):
>
> 51 percent of Americans pay ZERO income tax!!!
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.
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### Author:  [@scr4](https://boards.straightdope.com/u/scr4)
#### Post date: [February 11, 2012, 5:08pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/8 "2012-02-11T17:08:40Z")
> [@sbright33](#):
>
> Our Marginal tax rate is roughly 51% of our paycheck.
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.
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### Author:  [@Dewey\_Finn](https://boards.straightdope.com/u/Dewey_Finn)
#### Post date: [February 11, 2012, 5:14pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/9 "2012-02-11T17:14:17Z")
> [@sbright33](#):
>
> 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?
>
> [PolitiFact | John Cornyn says 51 percent of American households pay no income tax](http://www.politifact.com/truth-o-meter/statements/2011/jul/08/john-cornyn/john-cornyn-says-51-percent-american-households-pa/)
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?
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### Author:  [@davidm](https://boards.straightdope.com/u/davidm)
#### Post date: [February 11, 2012, 5:21pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/10 "2012-02-11T17:21:53Z")
Along with everything else that’s been said in this thread, I’d like to add this.
From the **Politifact** article:
> [@](#):
>
> As Cornyn noted, his statistics come from a document produced by the Joint Committee on Taxation, a respected bipartisan committee of Congress. The JCT found that for tax year 2009, roughly 22 percent of “tax units” (not exactly “households,” but we’ll give Cornyn a pass on the terminology) ended up without any tax liability.
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.
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### Author:  [@kaiter](https://boards.straightdope.com/u/kaiter)
#### Post date: [February 11, 2012, 5:29pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/11 "2012-02-11T17:29:28Z")
very nice!
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### Author:  [@lazybratsche](https://boards.straightdope.com/u/lazybratsche)
#### Post date: [February 11, 2012, 5:30pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/12 "2012-02-11T17:30:30Z")
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.
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### Author:  [@sbright33](https://boards.straightdope.com/u/sbright33)
#### Post date: [February 11, 2012, 7:28pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/13 "2012-02-11T19:28:22Z")
Yes, the top bracket is 35%. SSFICA is 15%. Don’t forget state taxes.
35+15=51?
I know what marginal taxes mean.
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### Author:  [@sbright33](https://boards.straightdope.com/u/sbright33)
#### Post date: [February 11, 2012, 7:35pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/14 "2012-02-11T19:35:57Z")
Yes, the article in my link explains it. I would like a shorter explanation.
You can do that in 2 words: SS/FICA.
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### Author:  [@SmartAlecCat](https://boards.straightdope.com/u/SmartAlecCat)
#### Post date: [February 11, 2012, 7:42pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/15 "2012-02-11T19:42:18Z")
From [Breaking Down the ‘Half Pay No Taxes’ Myth](http://www.dailykos.com/story/2011/08/22/1009489/-Breaking-Down-the-Half-Pay-No-Taxes-Myth)
> [@](#):
>
> Even in the worst year of ‘people not paying taxes,’ approximately 40 percent of households don’t pay federal income taxes, far short of the 50 percent claim.
>
> In normal years, it breaks down something like this:
>
> 53.6 percent do pay taxes
> 23.3 percent are either young people or destitute people
> 10.2 percent are the elderly
> 4.5 percent receive tax breaks that benefit the wealthy more than the poor and middle class
> 8.4 percent are (for the most part) working class people and people with kids that are trying to improve their lot in life.
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### Author:  [@SmartAlecCat](https://boards.straightdope.com/u/SmartAlecCat)
#### Post date: [February 11, 2012, 7:52pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/16 "2012-02-11T19:52:31Z")
From [Yes, 47% of Households Owe No Taxes. Look Closer.](http://www.nytimes.com/2010/04/14/business/economy/14leonhardt.html) (2010)
> [@](#):
>
> The 47 percent number is not wrong. The stimulus programs of the last two years — the first one signed by President George W. Bush, the second and larger one by President Obama — have increased the number of households that receive enough of a tax credit to wipe out their federal income tax liability.
>
> But the modifiers here — federal and income — are important. Income taxes aren’t the only kind of federal taxes that people pay. There are also payroll taxes and investment taxes, among others. And, of course, people pay state and local taxes, too.
>
> Even if the discussion is restricted to federal taxes (for which the statistics are better), a vast majority of households end up paying federal taxes. Congressional Budget Office data suggests that, at most, about 10 percent of all households pay no net federal taxes. The number 10 is obviously a lot smaller than 47.
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### Author:  [@SmartAlecCat](https://boards.straightdope.com/u/SmartAlecCat)
#### Post date: [February 11, 2012, 7:56pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/17 "2012-02-11T19:56:59Z")
From [Rick Perry: Middle Income Americans Don’t Pay Enough Income Taxes](http://www.forbes.com/sites/leonardburman/2011/08/18/rick-perry-middle-income-americans-dont-pay-enough-income-taxes/?partner=obinv)
> [@](#):
>
> \*We’re dismayed at the injustice that nearly half of all Americans don’t even pay any income tax. \*
> […]
> Okay, here are some facts, courtesy of the Tax Policy Center. They may not allay Mr. Perry’s dismay, but they should assuage the concerns of anyone with a soul.
> [ul]
> [li]Of the 46% of households who don’t pay income tax, nearly 2/3 pay payroll taxes.[/li][li]Of the 18% who pay neither income nor payroll taxes, more than half are elderly.[/li][li]More than 1/3 have incomes below $20,000. (Note: Ronald Reagan made the decision in 1986 to exempt people with incomes below the poverty line from federal income tax. Twenty-five years later, that still seems like a good call.)[/li][li]Only 1% of nontaxpaying households are nonelderly with incomes over $20,000. I’m dismayed about them too governor. Maybe we should close some of the loopholes that allowed almost 1,500 millionaires to escape income tax in 2009.[/li][/ul]
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### Author:  [@lazybratsche](https://boards.straightdope.com/u/lazybratsche)
#### Post date: [February 11, 2012, 8:07pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/18 "2012-02-11T20:07:20Z")
> [@sbright33](#):
>
> Yes, the top bracket is 35%. SSFICA is 15%. Don’t forget state taxes.
>
> 35+15=51?
>
> I know what marginal taxes mean.
: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%?
> [@sbright33](#):
>
> Yes, the article in my link explains it. I would like a shorter explanation.
> You can do that in 2 words: SS/FICA.
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”.
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### Author:  [@sbright33](https://boards.straightdope.com/u/sbright33)
#### Post date: [February 11, 2012, 8:22pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/19 "2012-02-11T20:22:37Z")
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.
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### Author:  [@RealityChuck](https://boards.straightdope.com/u/RealityChuck)
#### Post date: [February 11, 2012, 8:26pm UTC](https://boards.straightdope.com/t/zero-income-tax/612527/20 "2012-02-11T20:26:23Z")
> [@sbright33](#):
>
> Yes, the top bracket is 35%. SSFICA is 15%. Don’t forget state taxes.
>
> 35+15=51?
>
> I know what marginal taxes mean.
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.
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