According to a recent study, 45% of Americans didn’t pay any federal income tax last year. Many of those Americans carrying PAN and not paying any income tax actually received money from the government through refundable income tax credits.
I was shocked at the number of Americans not paying tax largely because I sent Uncle Sam a check for $1,463, even though my wife and I were students last year. According to the Bureau of Labor Statistics, the average household in 2009 (2010 numbers aren’t available yet) earned $43,460. In 2010, my wife and I were graduate students earning $1,000 each per month, plus some money for additional summer work, totaling $35,664. We made less than the average household, and yet did not qualify to be in the 45% group that didn’t pay federal income taxes.
It is important to note that it isn’t that the bottom half of wage earners didn’t pay tax, and the upper half did. The fact is people throughout the income brackets were able to avoid paying federal income tax.
This doesn’t make a lot of sense to me. We were two struggling students putting ourselves through graduate school and we were not able to pay our rent without the use of 6.9% interest student loans. Still, we paid more tax than at least 45% of Americans! If we had a child, we would have gotten a refund of not only the $1,463 we paid, but also several thousand for the child tax credit and the earned income tax credit.
This is just another interesting point in a long history of our countries baffling tax code. Maybe one day Washington will decide to stop picking winners and losers based on campaign donations and votes, and instead get this country’s finances back on track.