Corporations and Small Business Owners Also Pay No Income Tax During Bad Years Those lazy, good for nothing "Job Creators"! Wait what?
A GAO study found that in every year from 1998 to 2005, approximately 55 percent of large corporations paid no corporate income tax. ** But just 2.7 percent of large corporations reported no net tax liability in all eight of those eight years. This reflects a similar pattern as applies to families and individuals — those who do not pay income tax in a given year often do pay income tax over time.
This pattern also applies to small business owners and others who deduct business losses from their taxable incomes and thereby eliminate their income tax liability in some years.
* Tim Dowd and John B. Horowitz, “Income Mobility and the Earned Income Tax Credit: Short-Term Safety Net or Long-Term Income Support,” Public Finance Review (April 11 2011), pp 619-652; CBPP communications with authors.
** Large corporations are those with at least $250 million in assets or $50 million in gross receipts. Government Accountability Office, “Comparison of the Reported Tax Liabilities of Foreign- and U.S.-Controlled Corporations, 1998-2005,” July 2008, <a href="http://www.gao.gov/n...tems/d08957.pdf
The US global economic policy and approach to taxation of its citizens has changed so radically since the 1950s as to render your chart at best misleading and at worst meaningless. High paying manufacturing jobs have been off shored and replaced with low paying service sector jobs, in many cases subsidized with federal programs such as the EITC. These recipients are mostly hard working individuals unable to earn a living wage in today's, low paying, service oriented society.
The overwhelming majority of Americans pay taxes
When all federal taxes are considered, it is clear that the overwhelming majority of Americans pay such taxes. CBO data show that the poorest fifth of households paid an average of 4 percent of their incomes in federal taxes despite their low incomes in 2007, while the next fifth paid an average of 10 percent of income in federal taxes.
The bottom fifth of taxpayers paid 12.3 percent of their incomes in state and local taxes
Low-income families also pay substantial state and local taxes. Most state and local
taxes are regressive, meaning that low-income families pay a larger share of their incomes in these taxes than wealthier households do. The bottom fifth of taxpayers paid 12.3 percent of their incomes in state and local taxes in 2011, according to the Institute on Taxation and Economic Policy (ITEP). That was well above the 7.9 percent average rate that the top 1 percent of households paid (see Figure 3).
The bottom 20 percent of households pays an average of 16 to 17 percent of their incomes in taxes
Considering all taxes — federal, state, and local — the bottom 20 percent of households pays an average of 16 to 17 percent of their incomes in taxes. The next 20 percent of households pays about 21 percent of income in taxes, on average. 
Who Doesn't Pay Federal Income Taxes?
- Approximately 61 percent are working people who pay payroll taxes. As noted above, even the low-income households in this group pay substantial federal income taxes over time. The main options to force these people to pay federal income tax in years when their incomes are low include cutting the EITC or the Child Tax Credit, which would tend to reduce work incentives and increase child poverty and welfare use, and lowering the standard deduction or personal exemption, which could tax many low-income working families into, or deeper into, poverty.
- An additional 22 percent of people who did not pay federal income taxes in 2009 are people aged 65 or older who have modest incomes (and do not have earnings). The main option to make these individuals pay federal income tax would be to subject their Social Security benefits to taxation despite their limited income.
- The remaining 17 percent includes students, people with disabilities or illnesses, the long-term unemployed, and other people with very low taxable incomes. To make these people pay federal income taxes, policymakers would have to tax disability, veterans’, and similar benefits or make full-time students and the long-term jobless individuals borrow (or draw from any available savings) to pay taxes on their meager incomes.
- Read the full article here.