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Alaska has Lowest Percentage of Nonpayers

Tax Foundation Analysis of New IRS Data Provides State-By-State Look at Number of Tax Filers With No Income Tax Liability

Washington, DC, May 24, 2010 - Forty-five percent of tax filers in Mississippi had no federal income tax liability in 2008 - the highest percentage among all states, according to a new Tax Foundation report based on recently released IRS data. Alaska had the lowest percentage of "nonpayers," 21 percent.  

Nationally, the number of nonpayers reached a record high in 2008: roughly 52 million of the 143 million tax returns filed in 2008, or 36 percent.   "There's a growing population of Americans who have no skin in the game because their credits and deductions reduce their federal income tax bills to zero," said Tax Foundation President Scott Hodge, who wrote the new Fiscal Fact.

"Tax credits such as the child tax credit and earned income tax credit have become so generous that a family of four earning up to about $52,000 can expect to pay no federal income taxes at all."   The report, "States Vary Widely in Number of Tax Filers With No Income Tax Liability," is No. 230 in the Tax Foundation Fiscal Fact series and may be found online at http://www.taxfoundation.org/publications/show/26336.html.  

Following Mississippi, the 10 states with the highest percentage of tax returns filed resulting in zero or negative income tax liability are Georgia (41 percent), Arkansas (41 percent), New Mexico (40 percent), Alabama (40 percent), South Carolina (40 percent), Louisiana (39 percent), Texas (39 percent), Florida (39 percent) and Idaho (39 percent).   These states have among the lowest median family incomes in the country (ranging from $60,268 in Georgia to $46,668 in Mississippi) and nine out of the 10 are located in the South and Southwest.  

The 10 states with the lowest percentage of nonpayers after Alaska include Massachusetts (27 percent), Connecticut (27 percent), New Hampshire (28 percent), Wyoming (28 percent), North Dakota (29 percent), Maryland (29 percent), Washington (29 percent), Minnesota (30 percent) and Virginia (30 percent). These states are not geographically concentrated, but they all tend to have higher incomes. 

In terms of absolute numbers, the most populated states have the most nonpayers: More than 6 million tax-filing Californians (37 percent of the 16.4 million tax returns filed) paid no federal income taxes in 2008.   Hodge noted that these numbers don't include the millions of other Americans who have some income but not enough to be required to file a tax return.  

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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