Only 85 Million Americans Pay Federal Tax? No.

Is It True That Only 85 Million Americans Pay Federal Tax? No.
Josh Barro
4/17/2012
Full Article:
http://www.forbes.com/sites/joshbarro/2012/04/17/everything-about-this-drudge-headline-is-wrong
 
Splashed across the Drudge front page right now is the headline: “DATA: ONLY 85 MILLION PAY FED TAXES.” This is the old trope about most Americans “not paying taxes.” And as usual, it’s a lie.

The truth is that most American adults pay federal taxes. The data point that Drudge has mangled here is that only about 122 million Americans pay federal personal income tax—and most who don’t pay other federal taxes.

The underlying data here are the IRS’s preliminary figures on 2010 individual income taxes, which indeed show that only 85 million federal individual income tax returns included a tax liability. But income tax is not the same thing as federal tax. Payroll tax raises nearly as much money as personal income tax, and is much less progressive—essentially everyone who works pays it, at a flat rate, and the tax is actually capped so that high earners pay a smaller percentage of their income than moderate and low earners. And people who don’t pay income tax pay other federal taxes, such as excise taxes on gasoline and tobacco. They also bear some of the burden of the corporate income tax..

Overall, the federal tax code is progressive, but not nearly as progressive as the federal income tax alone, and a large majority of households have a positive federal tax liability.

So the “fed taxes” part of Drudge’s headline is wrong. What about “85 million”? There are 85 million tax units that paid federal income tax in 2010, but some of those tax units are married couples. The IRS hasn’t yet announced how many in 2010, but in 2009, 44 percent of filers with a federal income tax liability were married couples. If that figure held for 2010, then about 122 million Americans paid federal income tax.