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The COVID-19 pandemic has jacked up the number of nontaxpayers in the US. In 2020, 61% of American taxpayers did not pay federal income tax in the US, reveals a new study.
According to the Tax Policy Center estimates, last year nearly 107 million households of the 176.2 million households – 60.7% of total taxpayers fell into that bracket that either owed no income tax or received tax credits from the government.
In 2019, the number stood at 76 million households, representing 44% of all taxpayers.
The Tax Policy Centre, officially the Urban-Brookings Tax Policy Center, is a nonpartisan think tank based in Washington DC.
The think tank has attributed the spike in non-income tax paying households to the COVID-19 pandemic. “Last year, the share of non-payers increased by roughly 40 percent from the pre-pandemic year of 2019, due to a combination of a poor economy and multiple rounds of tax-based assistance to hard-pressed households,” said Howard Gleckman, senior fellow in the Tax Policy Center.
Since the effects of the pandemic haven’t subsided yet, and the stimulus effect is still there, the share of non-tax paying Americans is likely to remain high this year as well – at 57%. The number is expected to fall back down to 42% in 2022 and remain at around 41% or 42% through 2025 – given if both economic conditions improve and stimulus is withdrawn as per the plan.
For 2021, Congress upped the size of the child tax credit, the earned income tax credit, and the child and the dependent care tax credit — all of which erased the federal taxes owed for millions of American families. As on date, the tax centre estimates that, no American household with income of less than US$28,000 would need to pay tax, while 75% of households with income between US$28,000 and US$55,000 would need to pay taxes.
The study also highlights the polarisation in taxpayers: top 20% taxpayers paid 78% of federal income taxes in 2020, according to the Tax Policy Center, 10 percentage points up from 68% in 2019. The top 1% of taxpayers paid 28% of taxes in 2020, three percentage points up from 25% in 2019.
