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For Most Households, It’s About the Payroll Tax, Not the Income Tax

While policymakers obsess about the income tax, they often lose sight of an important detail: For two-thirds of households, the levy that matters most is the payroll tax. According to a new report by the Joint Committee on Taxation, the 80 million tax filers making $40,000 or less will collectively pay no federal income tax and many will even receive cash payments from the IRS in 2015. But they will pay $121 billion in Social Security and Medicare payroll taxes (including the employer share, which most economists believe falls on workers). Even middle-income households—those making between $40,000 and $75,000–will pay three times as much in payroll tax than federal income tax—nearly $190 billion of the former and just $64 billion of the latter. Read More…

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