According to new reports, nearly half of Americans did not pay federal income taxes for tax year 2010. However, as CNN reporter Jeanne Sahadi explains, this statistic is often misunderstood, and misrepresented. Remember, politicians use stats like this to get everyone riled up, without providing any underlying information. Remember, everyone pays taxes, just not everyone pays federal income taxes, and that’s by design.
For tax year 2010, roughly 45% of households, or about 69 million, will end up owing nothing in federal income tax, according to estimates by the nonpartisan Tax Policy Center. Some in that group will even end up getting paid money from the federal government.
That does not mean such households end up paying no taxes whatsoever. For instance, those in the group still pay other taxes such as state and local income taxes, as well as property and sales taxes.
And the group doesn't necessarily get off scot-free when it comes to payroll taxes -- which support Social Security and Medicare.
More than two-thirds -- or 49 million of the 69 million households -- pay payroll tax. Of those, 34 million end up paying more in payroll taxes than they get back on their federal return. The other 15 million pay payroll tax but they get enough refundable credits to offset what they paid.