Sep 18th 2012, 23:26:22
Here’s a quick answer. Roughly half of U.S. households that pay no federal income tax are exempted because of basic provisions such as limitations on tax for low-income earners, according to a 2011 study by the nonpartisan Tax Policy Center. The other half benefit from targeted breaks (known to tax geeks as “tax expenditures”), such as assistance for the working poor and for children in moderate-income families. Seniors also benefit from some of these targeted breaks.
To analyze which breaks are most important in moving people off the income-tax rolls, the TPC study arranged these tax expenditures into eight categories:
Elderly tax benefits (the extra standard deduction for the elderly, the exclusion of a portion of Social Security benefits, and the credit for the elderly);
Credits for children and the working poor (the child tax credit, the child and dependent care tax credit, and the Earned Income Tax Credit);
Exclusion of other cash transfers (such as welfare and disability payments);
Tax-exempt interest and some other deductions, such as for retirement savings;
Itemized deductions;
Education credits;
Other credits; and
Reduced rates on capital gains and dividends (zero rate on gains and dividends that would otherwise be taxed at 10% or 15%, 15% rate combined with credits).
he just keeps making it harder for himself
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