The U.S. income tax system is “very progressive,” and it’s increasingly taking on the role of providing social benefits to households, according to the Tax Foundation.
Lower household income and tax relief measures introduced during the pandemic allowed more Americans to pay no taxes in 2020. And President Joe Biden’s Build Back Better plan aims to extend these measures, making the tax system even more progressive, Garrett Watson, senior policy analyst at the Tax Foundation, wrote in a report.
The share of tax filers who pay income taxes dropped last year because of several federal relief measures, including the expansions in the child tax credit (CTC) and earned income tax credit (EITC).
According to preliminary estimates from the Urban–Brookings Tax Policy Center released last week, nearly 61 percent of U.S. households paid no federal income taxes in 2020, up from 44 percent in 2019.
The data show that out of 176.2 million individuals and married couples who could file a tax return, 144.5 million of them actually filed and about 107 million paid no federal income taxes last year, compared to 75.9 million in 2019.
The share of households that pay no income tax is projected to remain high at nearly 57 percent in 2021, according to the estimates.
“The large portion of households paying no income tax illustrates that the U.S. income tax system is quite progressive, and that the tax system is increasingly being used to provide social benefits to households,” Watson wrote. – READ MORE