Do The Super Rich Really Pay A Smaller Tax Rate?

Yes, if nobody claimed any tax credits...

Why nearly half of us don't pay income tax

It's a provocative fact about the tax code: Nearly half of U.S. households end up owing no federal income tax.

But it's not surprising given the addiction to tax breaks by both Democrats and Republicans, and the fact that the U.S. tax code is set up to be progressive.

"There's nothing nefarious going on here," William Gale, co-director of the independent Tax Policy Center, said on a call with reporters Wednesday.

Intentionally or not, Congress set it up this way.

Over the years, lawmakers have increased the number of non-payers by enacting reams of tax breaks -- such as tax credits for work, kids and education. And the Bush tax cuts, first passed more than a decade ago, expanded many of them.

Then lawmakers approved temporary tax breaks after the 2008 financial crisis to stimulate the economy, and that expanded the rolls even more, said Robert Greenstein, president of the liberal Center on Budget and Policy Priorities.

The Tax Policy Center estimates that for tax year 2011, 46% of households will end up owing nothing in federal income taxes.

The percentage was closer to 40% before the recession, Greenstein said.

Looking ahead if the Bush tax cuts are allowed to expire next year, the percentage of non-payers could drop to 36%, said Roberton Williams, a senior fellow at the Tax Policy Center.

While the Zero Tax Club includes some very high-income households, it is made up disproportionately of low- and lower-middle-income households.

http://finance.yahoo.com/news/why-nearly-half-us-dont-094700143.html