Tax Foundation: Record Numbers of People Paying No Income Tax; Over 50 Million "Nonpayers" Include Families Making over $50,000
Nonpaying status used to be a sure sign of poverty or near-poverty, but Congress and the President have changed the tax laws to pull much of the middle class into the growing pool of nonpayers. The income level at which a typical family of four will owe no income taxes has risen rapidly, now topping $51,000.
As a result, recently released IRS data for the 2008 tax year show that a record 51.6 million filers had no income tax obligation. That means more than 36 percent of all Americans who filed a tax return for 2008 were nonpayers, raising serious doubts about the ability of the income tax system to continue funding the federal government's ballooning expenditures.
Since the early 1990s, however, lawmakers have increasingly used the tax code instead of government spending programs to funnel money to groups of people they want to reward.
Quite aside from the fact that these refundable credits remove millions of people from the roster of Americans who support the government by paying the income tax, these credits have other undesirable effects such as added tax complexity.