I’ve often heard the complaint that more than 30% of lower income earners pay no taxes. This is often used to express concern that eventually enough people will not be paying taxes that politicians will have carte blanche to raise taxes as much as they want on the other people.
I decided to do a little more research into this and I found the raw IRS data from 2005 and built the following chart that shows the number of tax returns at each range of income, along with the number of tax returns with no tax due. Notably, 61% of those paying no tax have incomes of less than $15,000. What I found surprising is that while the percentage of no tax returns decrease as the income level rises, it doesn’t drop below 1% until the income group over $100,000.
My guess is that a large part of these no tax returns above $5,000 are attributable to medical expense deductions or similar. While I guess I am still concerned about the relatively high percentage of returns where no tax is due (32.58% for this data, and that completely excludes those where no return was filed at all), the fact that they are spread over a wider income range than I had expected make it much less significant an issue in my opinion.