by Will Freeland, Scott A. Hodge
July 25, 2012
Recent IRS data reveals that in 2010, over 58 million federal income tax filers had no income tax liability after taking deductions and credits. This amounts to nearly 41 percent of the roughly 143 million tax returns filed that year. Indeed, many of these filers actually had a negative income tax burden because they were eligible for “refundable” tax credits even though they had no income tax liability. These taxpayers did this through the wholly legal and legitimate use of deductions and credits provided in the income tax code. These 58 million nonpayers represent the second highest percentage of nonpayers since 1940, behind only 2009, where nearly 42 percent of income tax filers were nonpayers. By contrast, the low point in the modern era for nonpayers was 1969, when only 16 percent of filers had no income tax liability. As recently as 2000, 25.2 percent of filers paid no income taxes.