OK, class. Sit up straight. Only seven days to the tax-payment deadline in the United States. Time for a brief tax quiz:
Answer: Roughly 91 million individuals, filing 43.4 million tax returns (some of them joint, some single parents). They face zero income tax liability this year, and may even get subsidy money from the lnternal Revenue Service, reckons Scott Hodge at the Tax Foundation in Washington. That's out of an estimated 136 million federal tax returns that will be filed next year for 2006. These tax-free Americans, mostly in low-income tax brackets, take advantage of various tax breaks, such as the personal deduction, $1,000 child credits, or an Earned Income Tax Credit.
Another 15 million households and individuals file no tax return at all. Most make less than the taxable income threshold of $7,600 a year.
So roughly 121 million Americans, 41 percent of the population, "will be completely outside the federal income tax system," the tax research group finds. That includes those who are later refunded the full amount of the tax they paid - or more, because of tax credits.
The number of tax returns with zero or negative tax liability has risen from about 18 percent in 1983 to 32 percent this year. That number has been boosted considerably by the expansion of the child tax credit in the tax-cut legislation of 2001.
Wait a minute, says Bob McIntyre, director of Citizens for Tax Justice in Washington. He holds that 12 million dependents with low incomes, such as teenagers delivering newspapers, shouldn't be included in that 121 million income-tax-free count. Nor do lower-income people really escape the tax collector. The working poor pay combined Social Security and Medicare taxes that amount to 15.3 percent of their wages.
"How awful that the poor don't pay income taxes," Mr. McIntyre says sarcastically. "I looked at the study and laughed." Though payroll taxes are "dedicated" to social purposes, such as pensions, to many economists a tax is a tax is a tax.
To the conservative Tax Foundation, the federal income tax base should be "widened" (presumably to include some of those not paying income tax) to enable a further reduction in overall tax rates. That "reform" will be a difficult sell for lawmakers, the tax group notes, because so many millions of Americans pay no income taxes.
A: In 2001, $353 billion, estimates a new book from the Economic Policy Institute. That's the same sum as the projected fiscal 2007 federal budget deficit.
If Congress gave the Internal Revenue Service more money to hire tax collectors, the payoff would be "high," says Max Sawicky, an author of the book.
Q: Who pays the federal estate tax?
A: Few estates are taxed, contrary to widespread concerns. In 2003, 2,448,288 Americans died. But only 30,276 estates were taxable when their returns were filed in 2004 - that's 1.24 percent. Those returns had to involve more than $1 million in assets to be taxed.
This year the estate tax only applies to estates over $2 million ($4 million for a couple). Only 0.27 percent of estates are likely to owe Uncle Sam.
Nonetheless, most of those estates are so huge - in the multimillions and billions - that full abolition of the estate tax would cost Washington $1 trillion in revenues over 10 years, reckons United for a Fair Economy, an advocacy group in Boston. The Senate is scheduled to consider legislation to eliminate or shrink "death" taxes next month.
By the way, estates subject to tax in 2004 paid, on average, 11.5 percent of the net estate after expenses to Washington, notes a new study by McIntyre.
Yet, a new Tax Foundation public opinion poll finds 68 percent of adults favor elimination of the estate tax.
A: A month ago, the Congressional Budget Office put the total deficit for fiscal years 2007 through 2011 at $1.1 trillion. But that assumes Congress does not extend any of the Bush tax breaks (including cuts in the estate tax), and that it fails to provide any relief from the Alternative Minimum Tax that otherwise could hit 19 million middle-income taxpayers this year.
With elections this fall, many Washington observers doubt Congress will take major steps to reduce the deficit. President Bush's latest budget calls for $230 billion more in tax cuts over the next five years. Congress may not even pass a budget resolution.
"It will be difficult," says Leonard Burman, a tax expert at the Urban Institute in Washington. But perhaps Congress will tackle the budget issue more seriously in a postelection session. And maybe revenues will pour in faster than predicted.
A: This year, the average for all taxpayers is 21 percent, according to estimates of the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, both Washington think tanks.
The tax burden varies. The bottom one-fifth of taxpayers pay 3.3 percent of their income, the next fifth 7.5 percent, the middle quintile 14.4 percent, the fourth quintile 18.6 percent, and the top fifth 25.1 percent.
Millionaires and billionaires don't pay proportionally much more to Uncle Sam. The top 1 percent will pay 29.3 percent of their income, and the top one-thousandth 31.4 percent. About 345,000 Americans make more than $1 million.