In their determination to prevent any tax increase for the wealthiest Americans, conservatives have argued that the real unfairness of our tax code is that approximately half the country did not pay income taxes in recent years due to their earnings levels and the tax credits aimed at middle- and low-income families. Though conservatives frequently describe these people as paying “no taxes,” the reality is that income taxes are only one facet of the tax code. Most of those without income tax liability still face the payroll tax, federal excise taxes, and state and local taxes. Meanwhile, one in four American millionaires paid a lower tax rate in 2006 than did 10.4 million middle-income Americans.
Despite Not Earning Enough To Incur Federal Income Taxes, Middle- And Low-Income Americans Do Pay Federal Taxes
Payroll And Excise Taxes Affect Americans At All Income Levels. From the Center on Budget and Policy Priorities:
Read more after the jump.
The reality is that the income tax is one of a number of types of taxes that individuals pay, both over the course of their lifetimes and in a given year, and it makes little sense to treat it as though it were the only one that matters. Some 86 percent of working households pay more in payroll taxes than in federal income taxes. In fact, low- and moderate-income people pay a much larger share of their incomes in federal payroll taxes than high-income people do: taxpayers in the bottom 20 percent of the income scale paid an average of 8.8 percent of their incomes in payroll taxes in 2007, compared to just 1.6 percent for taxpayers in the top 1 percent of the income distribution (see Figure 2).
[CBPP.org, 5/31/11, internal citations removed]