Federal Income Tax Thresholds for Selected Years: 1996 Through 2009 (CRS Report for Congress)
| Release Date |
Revised Jan. 9, 2009 |
| Report Number |
RS22337 |
| Report Type |
Report |
| Authors |
Gregg Esenwien, Government and Finance Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
One principle of tax fairness or equity accepted by many is that households at the low end of the income spectrum, especially those near the poverty threshold, should not be subject to the federal income tax. This report estimates income tax thresholdsâthe point at which taxpayers have an actual out-of-pocket income tax payment. In addition, the report compares these income tax thresholds to the latest available poverty thresholds for families of different sizes.
The major structural components of the income tax code which influence the income tax threshold levels include the standard deduction, the personal exemption, the child tax credit, and the earned income tax credit (EITC). Each of these items increases the income level at which an individual or family incurs an out-of-pocket federal income tax liability. In 2009, single taxpayers eligible for EITC with income below $11,124 do not face the income tax liability. Married couples with two kids do not have to pay income tax until their income reaches $44,900. The threshold for head of household filers with one child is $31,026 in 2009.
Federal income tax thresholds are high enough so that, with the exception of single taxpayers, the equity principle of exempting poverty level households from income taxation has been achieved over time. The introduction and subsequent increase in the child tax credit along with the measures reducing the marriage tax penalty, however, have significantly increased income tax thresholds for households with children, especially married filers.
For households with children, the income tax thresholds are now substantially higher than the comparable poverty thresholds. In fact, the child tax credit represents a departure from past policy practices because it is not designed primarily as a means of differentiating between families of different size at or near the poverty threshold, but rather is designed to provide general tax reductions to middle and upper income taxpayers with dependent children under the age of 17.
The increases in the child tax credit and marriage tax penalty relief measures are scheduled to sunset (expire) in 2011. The provisions may be extended or modified, however. As a result, it is likely that Congress will revisit the issue soon.
This report, originally written by Gregg A. Esenwein, now retired, will be updated as new data become available or as events warrant.
