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Report: 57 Percent of American Households Paid No Income Tax in 2021

By:
Ruth Singleton
Published Date:
Mar 25, 2022

iStock-182465269 1040 Form

A report by the Tax Policy Center has found that 57 percent of U.S. households paid no income tax last year because of COVID-19-related job losses, relief funds, tax credits and stimulus payments, CNBC reported. The percentage rose from 44 percent pre-pandemic.  

CNBC quoted Howard Gleckman, senior fellow at the nonpartisan organization, who, said that pandemic-related job losses, a decline in incomes, stimulus checks and tax credits were largely responsible for the increase. He noted that the expanded Child Tax Credit substantially reduced “the income tax liability of more than a hundred million households and temporarily turned many from payers of small amounts of federal income tax to non-payers.” 

Most Americans continued to pay payroll taxes, so that the portion of Americans who paid neither payroll nor federal income taxes was only 19 percent in 2021, slightly higher than the 17 percent  rate before the pandemic.

And because many of the pandemic-related tax benefits are ending, Gleckman predicted that the portion of households not paying income tax will go down to 42 percent in 2022 and to 38 percent by 2029.

The Tax Policy Center’s report also addressed a proposal by Sen. Rick Scott (R-Fla.) that would require all Americans to pay some federal income tax, even if it is a nominal amount. The center estimated that if all Americans paid at least $100 in income taxes, that would result in $100 billion in additional revenue in 2022. Yet such a plan would be highly regressive, the report found. More than 80 percent of the tax increase would be paid by households making about $54,000 or less, and 97 percent would be paid by those making less than about $100,000. 

 

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