Tax — Federal

Lone Group Taxed Into Poverty Should Receive a Larger EITC

Policymakers have taken important steps in recent decades to prevent the federal tax code from taxing people into or deeper into poverty. This bipartisan effort has helped shape various features of the tax code including the Earned Income Tax Credit (EITC), a tax credit for low- and moderate-income working people. In addition to its other roles, such as serving as a pro-work wage subsidy, the EITC helps keep income and payroll taxes from pushing millions of low-wage workers into poverty.

But the commitment to keep the federal tax code from taxing low-income workers into poverty has fallen far short for one group of 7 million people: childless adults.

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Federal Income Taxes on Middle-Income Families Remain Near Historic Lows

Federal taxes on middle-income Americans are near historic lows, according to the latest available data. That’s true both for federal income taxes and total federal taxes:

  • Federal income taxes have declined significantly in recent decades;
     
  • Expiration of temporary tax breaks raised effective income tax rate;
     
  • Expiration of payroll tax cut is biggest tax change for most people in 2013;and
     
  • Overall federal taxes also at low levels.

 

The Top 10 (Well, 11) Federal Tax Charts

To usher in Tax Day, we have highlighted our top 11 charts on federal taxes, which provide context for debates on issues like tax reform and deficit reduction.

One of the featured charts reminds us what taxes pay for:

  • Social Security, major health programs like Medicare and Medicaid, and national defense account for roughly two-thirds of federal spending.
     
  • Safety net programs (such as unemployment insurance and nutrition programs) and interest on the debt account for 12 percent and 6 percent of federal spending, respectively.
     
  • The remaining 18 percent goes to such other areas as roads, education, and health and science research.

Related: Tax Day Roundup, 2014: Recent Analyses, Posts, and Charts

 

Basics

The income tax on individuals and the payroll tax, which is deducted from workers’ wages and used to help finance Social Security and Medicare, each made up about 40 percent of federal revenues in 2010. The federal government also collects revenue from corporate taxes, excise taxes, and other sources.

Policy Basics:
-
The Child Tax Credit
- The 2001 and 2003 Tax Cuts
- Where Do Our Federal Tax Dollars Go?
- The Estate Tax
- The Earned Income Tax Credit
- Deficits, Debt, and Interest

Featured Experts

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  3. Chye-Ching Huang

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  4. Chuck Marr

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The Center analyzes major tax proposals, examining their likely effects on the economy and on the government’s ability to address critical national needs, especially over the long term.  We place particular emphasis on the effects of tax proposals on households at different income levels.  In addition, we analyze trends in the level of federal revenues, income distribution, and tax burdens.

By the Numbers

Spending Through the Tax Code Skews Towards the Top
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