A common complaint among readers of Opinion L.A. goes something like this: "Under President Obama, 50% of the country pays no taxes." That's flatly false: Everybody pays taxes in some fashion, whether it be sales taxes, excise taxes, property taxes, payroll taxes or income taxes. But it is true that almost half of Americans pay no income taxes -- 46%, to be precise, according to a recent report by the nonpartisan Tax Policy Center.
The Wall Street Journal's Jonathan Weisman had a piece Friday that used the center's report as a jumping-off point to talk about how the income tax burden is distributed. It's definitely worth reading, as is the center's report, to understand why so many people are exempt from income taxes. For starters, though, it's worth remembering that most of the people who don't pay income taxes do pay Social Security and Medicare taxes, which (when you include the employer's share) amounts to about 15% of their wages.
According to the report, half the people who pay no income taxes do so because they simply don't make enough money. The tax cuts pushed by President George W. Bush explain part of this phenomenon: They raised the standard deduction for married couples and the tax credit available for each dependent child. The "Making Work Pay" tax credit included in Obama's stimulus package in 2009 also increased the number of lower-income workers with no income tax liability, but only temporarily; the credit expired at the end of 2010.
For the other half not paying income taxes, the main reason is tax policies specifically designed to help the elderly and low-income workers with children, the report notes. Other, less common reasons that enabled some wealthier taxpayers to escape income taxes include itemized deductions, preferential treatment for capital gains and dividends, education tax credits and other specialized tax breaks.
full (with links including to the WSJ article):
http://opinion.latimes.com/opinionla/2011/08/taxes-about-those-folks-who-dont-pay-taxes.html