A new report estimates more than half of American households paid no federal income tax in 2021, largely due to COVID-19-related funds and aid.
The Tax Policy Center found that 57 percent of U.S. households paid zero federal income tax in 2021, compared to 44 percent before the pandemic, as first reported by CNBC. Howard Gleckman, senior fellow at The Tax Policy Center, told CNBC that the drastic jump could be attributed to COVID-19-related job losses, a decline in income, stimulus checks and tax credits.
The expanded child tax credit, part of the $1.9 trillion stimulus bill signed by President Biden in March 2021, also reduced the income tax liability of many families, since it is a fully refundable tax credit. The expansion increased the number of households who received the credit and the amount per child.
However, Congress failed to pass the extension of the expanded child tax credit after Sen. Joe Manchin (D-W.Va.) stopped the Build Back Better bill in December 2021. Gleckman told CNBC that because tax credits like these will likely come to an end or decrease as the pandemic wanes, the number of non-payers will decrease.
The study also notes that most workers pay payroll taxes, so the share of Americans that pay neither payroll nor federal income taxes was only 19 percent in 2021 compared to 17 percent before the pandemic.