Nearly 61% of Americans paid no federal income taxes in 2020, a temporary spike attributed to a sudden decline in income and a massive boost in government subsidies during the coronavirus pandemic, according to a new study published this week.
Data released Wednesday by the Urban-Brookings Tax Policy Center shows that 106.8 million U.S. households owed no taxes last year – a significant jump from 2019, when 75.9 million paid no taxes.
“The number of households who paid no income tax last year truly was eye-popping,” Tax Policy Center senior fellow Howard Gleckman wrote. “But keep in mind: It was only temporary.”
The increase stems from the pandemic-driven unemployment surge – some 20 million Americans lost their jobs when the economy shut down – and the unprecedented government response to the economic downturn, including three stimulus checks, boosted federal jobless benefits and the expanded child tax credit.
Because the stimulus checks were designed as refundable tax credits, they significantly reduced tax liability in both 2020 and 2021, the analysis said – and in some cases, flipped some households from paying income tax to not doing so.
