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Low-income households

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From the Briefing Book

How does the federal tax system affect low-income households?

December 21, 2015 by tpc-admin

Q.

How does the federal tax system affect low-income households?

A.

Most low-income households do not pay federal income taxes, typically because they owe no tax (as their income is lower than the standard deduction) or because tax credits offset the tax they would owe. Some receive substantial rebates via refundable tax credits. However, nearly all low-income workers are subject to the payroll tax.

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Are federal taxes progressive?

December 20, 2015 by tpc-admin

Q.

Are federal taxes progressive?

A.

Overall, yes. But that’s not the case for each tax.

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Why do low-income families use tax preparers?

December 21, 2015 by tpc-admin

Q.

Why do low-income families use tax preparers?

A.

Many low-income families owe no income tax but still must file a tax return to receive refundable tax credits, including the earned income tax credit. Those who do file often seek help, which nearly always comes from a paid preparer. The cost of that help erodes the net value of refundable credits. That cost might be worth bearing if preparers helped their clients claim tax benefits that otherwise might be missed, but many don’t.

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