In 2021, moreover, half of all families in the United States paid no federal income taxes, a brief rise owing to significant COVID-19 relief expenditure in tax credits and stimulus payments.
According to new research by the independent Urban-Brookings Tax Policy Center, 57% of Americans did not pay any taxes last year. While this is a slight decrease from last year’s 61%, it is a huge increase from the 44% reported before to the pandemic’s outbreak.
“The percentage of families that did not pay income tax last year was simply staggering,” Tax Policy Center Senior Fellow Howard Gleckman stated. “However, bear in mind that it was just transitory.”
The rise is due to the pandemic-induced increase in government expenditure, including three stimulus checks, additional federal jobless assistance, and an enlarged child tax credit.
Because the stimulus checks were structured as refundable tax credits, the researchers concluded that they considerably decreased tax liabilities in 2020 and 2021. And in certain circumstances, the checks resulted in some households ceasing to pay income tax.
In essence, no household earning less than $28,000 paid federal income tax last year, and a majority – around 75% – of those earning between $28,000 and $55,000 will do so this year. Around 43% of middle-income households paid no federal income tax.
While many households avoided paying federal income taxes, most Americans paid payroll or state income taxes. According to the report, about four out of every five persons paid at least one of these taxes.
Almost everyone paid some tax to the government, whether state and municipal sales taxes, excise taxes, property taxes, or state income taxes.
The number of households who do not pay federal income taxes is forecast to decline to 75 million next year, or a little less than 42%. By 2026, the percentage of Americans who do not pay any federal income tax is expected to fall to around 40% under current legislation.
And middle-class Americans’ tax liabilities are certain to increase in the future years. By the end of next year, just around 21% of taxpayers will be nonpayers. This proportion is predicted to decline to 18% by 2026.