TaxWatch: Trump reportedly paid no federal revenue tax for 10 of the 15 years previous to his election. Why 75 million U.S. households don't pay federal revenue tax

President Donald Trump paid just $ 750 in federal taxes in both 2016 and 2017, and no federal income tax in 10 of the last 15 years due to massive business losses, the New York Times reported on Sunday. The paper said it received more than two decades of tax return data from Trump and his corporate organization, despite not including his personal tax returns for 2018 and 2019. The Times said more results of its taxes would be released in the coming weeks.

Ivanka Trump said she received "payments from a consulting firm she jointly owned totaling $ 747,622, the exact same amount of consulting fees as the Trump Organization's tax deduction for hotel projects in Vancouver and Hawaii. " Even while declaring losses, Trump took tax deductions on expenses "including apartment buildings, planes and $ 70,000 on television hairstyling," the Times reported.

Trump tweeted on Sunday
+ 0.70%

But what about the rest of the Americans? Who Doesn't Pay Federal Tax? According to estimates by the Tax Policy Center, a not-for-profit joint venture of the Urban Institute and the Brookings Institution, based in Washington, DC, approximately 75.5 million, or 43.3% of households that file taxes do not pay federal income tax. This is below the 50% high during the Great Recession.

One important caveat: these people are obviously still paying sales tax, property tax, and other taxes.

You will receive personal exemptions, the standard deduction, amounts without brackets and, more recently, tax credits. But for the most part, they don't make enough money, and many people who work and don't owe federal income taxes are still giving Uncle Sam money because their paychecks come for Social Security and Medicare. "The large percentage of people who do not owe federal income tax is a feature and not a bug of the Tax Code," according to the Tax Policy Center.

Many families with low and below average incomes pay more income tax than federal income tax.

According to Gary Burtless, a senior fellow at the Brookings Institution, a centrist research group founded in 1916, many families with low and below average incomes pay more wage taxes than federal income taxes each year.He said US individual income tax is progressive, with much higher tax liabilities if you do increase the income distribution, and very low or negative income tax liabilities at the end of the income distribution.

Don Fullerton, professor of finance at the University of Illinois at Urbana-Champaign, took a closer look at the Tax Policy Center's numbers. "Older people are much more likely than younger people to pay taxes or receive transfers," he said. "In fact, they get most of the referrals because they get social security benefits." He found that 11% of 25-55 year olds do not pay federal income tax, compared to 48% of those over 55 and 80% of those over 75.

"Younger people are more likely to receive transfers other than Social Security, mainly due to unemployment insurance benefits that are only available to people of working age," Fullerton added. 11% of those under 60 and 6% of those over 60 receive non-social security transfers. Those under 60 who receive transfers will receive an average of $ 4,734, while those over 60 will receive an average annual benefit of $ 9,977. "Social security benefits make up most of the difference," he said.

"The progressive tax rate structure of the federal income tax system compresses the after-tax distribution of income so that income tax effectively works like an insurance," wrote Fullerton. “We pay a premium – because we have more taxes in good years – in order to keep a higher proportion of our income in bad years. How we rate this insurance aspect of the income tax system may depend on how often we don't owe federal income tax. "

Older people are much more likely than younger people to pay taxes or receive transfers.

"Although a significant portion of the US population does not owe taxes or receive transfers in any given year, only a small fraction of those people remain in those states," he added. “Almost half of those who don't owe taxes pay taxes within two years, and about four fifths have paid taxes within ten years. Of those who receive remittances other than Social Security, almost half do not receive the remittances in the following year, and almost 90% did not receive the remittances six years later. "

How do voters feel about that? All but the top 20% of families pay more wage taxes than federal income taxes. This comes from Treasury Department data cited by the Pew Research Center, a non-partisan think tank in Washington, DC. 64% of Republicans and Republican-centric independents say the current US tax system is "very or moderately fair," while only half of Democrats and Democrats (32%) see the tax system as fair, according to the 2019 survey.

Only about a third of Americans are in favor of Trump's 2017 tax change. "While rising proportions of Democrats say they are 'very' bothered by the feeling that some businesses and wealthy people are not paying their fair share of taxes (79% of Democrats say so), Republicans have concerns about this Issues subsided. " Said Pew. "Today, 42% of Republicans say they're deeply affected by the feeling that some companies are not paying their fair share of taxes (up from 55% in 2015)."

Higher-income taxpayers saw the largest tax savings from the Tax Reduction and Employment Act of 2017. Their individual tax rates were reduced significantly.

But it was bad news for those living in a high-tax country with a high amount of mortgage debt: the tax shift introduced new restrictions on individual deductions for state and local taxes and mortgage interest expenses; 32% of those earning less than $ 30,000 received a tax cut versus 89.5% of those earning $ 100,000.

Related Articles