it’s not That Unusual.
Former President Donald Trump and his wife, Melania, paid $0 in income taxes for 2020, according to a report released late Tuesday by Congress’ Joint Taxation Committee.
That year, Trump reported a loss of $4.8 million due to the COVID pandemic. In 2018 and his 2019, the then-president’s reported income increased, paying about $1.1 million in federal taxes each year.
About 72.5 million U.S. households, or 40%, will no longer pay federal income taxes this year, according to estimates from the Center for Tax Policy. This is down from her 100 million households (60%), which was a pandemic high two years ago. By 2021, nearly 56% of households, or 99 million households, were paying no federal income tax, he said in a report released earlier this year by a bipartisan think tank.
But the reason Trump paid nothing in taxes — a reported loss of about $5 million — is very different from why most of the other 60% of Americans paid nothing in 2020. increase.
People earning less than the standard deduction ($12,950 for individuals and $25,900 for couples filing jointly in 2022) don’t have to pay federal income tax (although tax experts say tax We recommend that you submit a declaration to take advantage of it). deductions such as the income tax credit and the child tax credit).
Of course, even people who don’t pay federal income tax do pay sales tax, property tax, and other types of taxes. And many people who work and do not owe federal income taxes have money taken out of their paychecks for Social Security and Medicare.
In fact, according to Gary Bartress, a senior fellow at the Brookings Institution, a centrist research group founded in 1916, many low- and below-average families pay more than their federal income tax. I pay the fee every year.
““Almost all U.S. residents who pay no income tax or have very low taxes have relatively low current taxable income. Many of these people are retired and have modest current taxable income.”
For the most part, the U.S. personal income tax is progressive, with a heavier tax burden higher up the income distribution scale and a very low or negative income tax burden at the bottom of the scale, Bartress said. .
“The logic of our income tax system is that Americans’ income tax obligations should fall most heavily on those who are most able to pay,” he told MarketWatch. Nearly all U.S. residents with low current taxable income have relatively low current taxable income.Many of these people are retired and have modest current taxable income.”
“But remember, many of them paid positive income taxes early in their careers. did It could be wages, self-employed income, or other taxable income,” Burtless added. “Other non-taxpayers are younger and have very modest taxable income (although many of these people owe payroll taxes for Medicare and Social Security).”
“In addition, other non-payers are simply very poor and/or have many dependents,” he added. “Under the logic of our income tax system, we expect and consider it fair that these low-income people owe no federal income tax.”
Don Fullerton, a professor of finance at the University of Illinois at Urbana-Champaign, found in his own analysis that older individuals are much more likely to pay no tax or receive tax transfers than younger individuals. .
Older people receive the majority of tax transfers through social security benefits, while younger people are more likely to receive transfers such as unemployment insurance benefits.
“Federal income taxes have always excluded a significant percentage of households through a combination of individual exemptions, standard deductions, zero-bracket amounts, and more recently tax credits,” said the Tax Policy Center.
