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1 Scott A. Hodge, Federal Transfer Payments to Low-Income Households Top $17,000 1 (2007)

handle is hein.taxfoundation/ffifxz0001 and id is 1 raw text is: TAX FOUNDATION April 25, 2007 Federal Transfer Payments to Low-Income Households Top $17,000 by Scott A. Hodge Fiscal Fact No. 85 On Thursday, April 26, 2007, the House Ways and Means Subcommittee on Income Security and Family Support will hold a hearing to discuss ways of reducing poverty. A recent report from the Census Bureau shows the poverty level remained stable between 2006 and 2007, but there has been a slight increase in the poverty rate since 2000. Before the committee can answer the question, How do we reduce poverty? lawmakers first must have some basic facts on the amount of taxes paid by low-income Americans and the amount of spending they currently get from government. A new Tax Foundation study, Who Pays America's Tax Burden, and Who Gets the Most Government Spending? shows that the typical low-income household pays $1,684 in total federal taxes, yet receives $17,724 in federal transfer payments alone, not to mention other federal programs such as education and public transportation.l In other words, the typical low- income household receives $10.53 in transfer payments for every dollar it pays in federal taxes. Not much more can be done through the tax system to help these households because the vast majority of low-income households pay little or no income taxes and only a modest amount of other federal taxes such as payroll and excise taxes. Indeed, some 44 million Americans file a tax return but have no income tax liability after taking advantage of their credits and deductions. An additional 15 million earn some income but not enough to be required to file an income tax return. This brings the number of Americans outside of the federal income tax system to 58 million. Many of those who pay no income taxes still get generous subsidies from the IRS through the Earned Income Tax Credit. Indeed, the IRS sends out some $36 billion each year in refundable checks to low-income households. In many cases, these subsidies more than offset the amount these workers pay in payroll and excise taxes. On the spending side, the federal government uses a vast array of programs to provide direct transfer payments2 as its primary vehicles for poverty reduction. In 2004, transfer programs such