The Pandemic Has Most Americans Paying No Federal Income Taxes
Given my recognition that taxation is theft, or at least a thoroughgoing act of extortion, I’m generally delighted when people escape the clutches of the tax man. But news that the majority of Americans owed no income tax for 2020 and will similarly pay no income taxes for 2021 raises concerns in two counts: first, that tax obligations disappeared for so many because the economy took such a brutal hit during the pandemic; second, that the result is a situation in which a minority of the population foots the bill for the policies of politicians selected by the majority.
“The Tax Policy Center estimates that last year nearly 107 million households, or about 61 percent, owed no income tax or even received tax credits from the government,” Howard Gleckman, a senior fellow at the Tax Policy Center, noted last week. “The spike is likely to be temporary, however. The share of non-payers will decline to about 102 million or 57 percent this year.”
In recent pre-pandemic years, the percentage of tax returns with no income tax liability has been closer to 44 percent in Tax Policy Center’s figures, though it has trended upward over time.
“The percentage of filers with no income liability has generally increased from where it was nearly 40 years ago,” the National Taxpayers Union Foundation reported in 2018. “This trend is indicative of a progressive income tax code under which higher-income earners pay a larger share of taxes while low-income earners are generally shielded from significant income tax liabilities.”
As the National Taxpayers Union Foundation points out, those with no income tax liability are generally less prosperous, and it’s no surprise that their numbers spiked in 2020 as the economy tanked during a period of pandemic concerns resulting in both voluntary social distancing and, more concerningly, mandatory restrictions on economic activity.
“U.S. states with brief or no lockdown measures (e.g. South Dakota and Nebraska) experienced the smallest degrees of economic damage,” Peter C. Earle and Amelia Janaskie concluded for the American Institute for Economic Research. “And predictably, in industries that are most sensitive to lockdown – small firms generally, where most job creation takes place; service industries, which now dominate the US economy; and more br
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