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Nearly One Third of All Tax Filers Paid No Federal Income Taxes in 2007

About 46.6 Million Filers Were "Nonpayers" Due to Exemptions, Deductions, Credits

Washington, DC, December 4, 2009 -- Nearly one-third of the 143 million federal income tax returns filed in 2007 resulted in no tax payment, according to a Tax Foundation analysis of IRS data. That means the tax filers got back every dollar that had been withheld from their paychecks, and often more. Roughly 46.6 million tax returns, or 32.6 percent, are filed by such "nonpayers," people whose exemptions, deductions and credits wiped out any federal income tax due.

"In about half the cases, additional money was 'refunded' to these tax filers -- meaning they received a check from the government -- similar to welfare spending programs," said Tax Foundation President Scott Hodge, who authored Tax Foundation Fiscal Fact No. 202, "Surge of 'Nonpayers' Will Be Part of Bush Tax Legacy." The Fiscal Fact is available online.

The percentage of "nonpayers" in 2007 is the second-highest, slightly lower than the all-time highest in 2006, when 33 percent of tax filers paid nothing. A record has been set every year since 2002 (30.1 percent), as tax cuts throughout the Bush years -- especially the refundable child tax credit -- pushed low- to middle-income people off the federal income tax rolls.

"The number of 'nonpayers' can be expected to soar due to programs such as President Obama's 'Making Work Pay' tax credit," Hodge said. "We now have an enormous class of Americans who are disconnected from the cost of government and have no skin in the game, and that is not good for democracy."

The percentage of nonpayers was fairly low in the 1960s and again in the early 1980s. The number of federal income tax returns filed with zero or negative income tax liability each year from 1950-2007 is available online.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

Tax Foundation Fiscal Fact No. 202, "Surge of 'Nonpayers' Will Be Part of Bush Tax Legacy," is available online

 

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