Tax Burden on Various Americans
David Leonhardt has two good tax related pieces (an article, and a blog post) that shed some light on who pays how much taxes in the US.
The full article, Yes, 47% of Households Owe No Taxes. Look Closer., is noteworthy for this truism about the tax burden. It is rather informative:
“There is no question that the wealthy pay a higher overall tax rate than any other group. That is an American tradition. But there is also no question that their tax rates have fallen more than any other group’s over the last three decades. The only reason they are paying more taxes than in the past is that their pretax incomes have risen so rapidly — which hardly seems a great rationale for a further tax cut.”
The blog post, Taxing the Rich, Over Time, is noteworthy for this supporting chart, looking at taxpayers by quintile, as well as the tax burden on the top 0.1%:
>
Chart courtesy of Economix
>
Sources:
Taxing the Rich, Over Time
DAVID LEONHARDT
Economix, April 13, 2010
http://economix.blogs.nytimes.com/2010/04/13/taxing-the-rich-over-time
Yes, 47% of Households Owe No Taxes. Look Closer.
DAVID LEONHARDT
NYT, April 13, 2010
http://www.nytimes.com/2010/04/14/business/economy/14leonhardt.html
Tweet
Facebook
Reddit
Digg this!
April 14th, 2010 at 4:09 pm
While I get the idea that nearly 50% of those who live in the unUnited States pay none of the rentier taxes one should not think of taxes as only applying to income and the other rentier taxes.
Even those who pay none of these taxes pay plenty of other taxes.
That said, through stealth and an ignorant public, congress has managed to supply a socialist economy on a republic, without the vote.
There is for all practical purposes a guaranteed income to just about everyone. If you don’t have one, you are doing something wrong.
April 14th, 2010 at 4:14 pm
I love this topic. Determining effective tax rates is the holy grail.
The rich have many moving parts. Tough too get a handle on what they pay.
The working poor, pay very little in federal. But pay higher % in sales, property, payroll, and anything consumption related (as they consume most or all of their income)
The middle and upper middle class, by any metric, get annihilated.
I think rich and poor alike could agree our tax code is a confusing abomination that should be taken out behind the barn and shot out of mercy.
April 14th, 2010 at 4:26 pm
I don’t know if the chart above is accurate or not.
But supposedly, in the 1970’s the wealthiest 1% paid about 17% of all Federal taxes, whereas in the year 2006, the wealthiest 1% paid about 40% of all Federal taxes. This, despite the fact that marginal tax rates were much higher in the 1970’s.
I’m not opposed, on moral grounds, to “soaking the rich”, but given the realities of human behavior (behavior of the “fat cats”, as well as members of Congress), I don’t think that simply raising marginal tax rates is going to get the wealthiest 1% to pay much more than 40% of all Federal taxes; such a policy change could very well backfire.
Certainly, there is evidence that raising cap gains/dividends taxes doesn’t produce more revenue to the IRS.
April 14th, 2010 at 4:40 pm
The chart above includes payroll taxes. The wealthiest 1% will end up receiving far less than 1% of the benefits of the payroll taxes. In fact, the wealthiest 5% will end up receiving far less than 5% of the benefits of the payroll taxes. The reason is that there’s going to have to be “means testing”, given all the unfunded liabilities.
So, it’s fine to include payroll taxes in the analysis of tax burden. But one should also consider the prospect of “means testing” in the future, in attempting to decide who will benefit from those payroll taxes.
April 14th, 2010 at 4:44 pm
Leonhardt makes the standard mistake in computing ‘Payroll Taxes’, by falsely assuming that the employer pays half the Social Security tax. The worker actually pays it all (15.3 %)… and thus has a much higher ‘real’ payroll tax rate.
FICA taxes are intentionally deceiving. Under the ‘Federal Insurance Contributions Act’ (FICA), 12.4 percent of your earned income {up to $106,800 annually} must be paid into Social Security, and another 2.9 percent must be paid into Medicare {no wage limit}. These are highly regressive taxes that kick in on the very first dollar anybody earns.
A worker “seems” to pay ‘only half’ the FICA bill (6.2% Social Security + 1.45% Medicare)… with the employer “contributing” the other half. But in reality the worker pays the full FICA percentage of 15.3% (= 12.4% + 2.9%) automatically withheld from his gross wages.
Employers know exactly what a worker will cost them to employ… and are usually not in the charity business
April 14th, 2010 at 4:54 pm
The nitpick I have with all the tax analysis I’ve ever seen is the assumption that high income is the same thing as wealth. These articles often refer to the wealthy or the rich as those who earn in the top 10% or the top 1%, but this completely ignores the distinction between an income statement and a balance sheet. Many young professionals are considered rich who make $125,000 a year but carry huge debt loads from mortgage and educational borrowing. They may be income rich but have virtually no savings and possibly a negative net worth due to asset price deflation. These people get absolutely hammered by our current tax system.
April 14th, 2010 at 5:00 pm
PatientCash @ 4:54
But what’s the alternative?
I certainly don’t favor any tax system that rewards individuals for taking on more debt.
(There’s more than enough debt to go around as it is).
April 14th, 2010 at 5:12 pm
Some of the readers comments were more informative than the actual article – a very high level analysis.
April 14th, 2010 at 5:17 pm
Its ALL about the payroll tax.
The joe six-pack working at a factory, wal mart or in fast food… pays an effective 12.4% payroll tax rate.
The 250k/yr lawyer pays about 5% effective payroll tax rate.
The $1m/yr banker pays about 1.2% effective payroll tax rate.
Thats >10% regressive at the high end. Unbelievable.
If Obama would just make payroll taxes 3% employee, 3% employer on ALL INCOME. 75% of our tax inequities and even economic problems (low-end jobs stimulus?) would be allieviated.
Furthermore, removing the “cap” better funds long-term SS and Medicare liabilities due to income growth.
April 14th, 2010 at 5:24 pm
I would very much like to see a solid source for DL’s claim about the percent of all Federal taxes paid by the top one percent in the seventies(17%) and in 2006(40%). The graph makes that seem impossible. What does “supposedly” mean? It sounds more like a Republican talking point than a fact.
April 14th, 2010 at 5:25 pm
I never thought I’d agree with Cognos. Today must be special. Hell, maybe I’ll even go long the rally!
As long as I’m dreaming, how about a sound currency, interest rates set by the market, and no public subsidies of private risk?
(Oops, I just killed the rally…)
April 14th, 2010 at 5:25 pm
So 53% of taxpayers pay for the other 47% to enjoy the benefits of US citizenry (more or less citizenry, and more or less 53%)? That’s a massive wealth transfer at the point of a nuclear-tipped missile.
Is this sustainable? Only if the revenue shortfalls continue to be made up by massive fiscal imprudentry.
Can you get more from the 53% that pay taxes? Of course, and it is inevitable. What about the 47% that don’t pay? Across the board benefit cuts are the only answer. This will necessarily be regressive–the utilitarian value of another dollar to an impoverished soul surviving on assistance is far greater than that of an extra dollar to an investment banker.
What will also happen is greater taxation of wealth, not just income. Paying income tax is for suckers, as the private equity/LBO guys like to crow. But the government will have to come after them and others like them at some point. It’ll be sorta neat watching the fighting. But I have no doubt who’ll win in the death struggle to see which entity, government or Wall Street survives. My bet is on the guys with the nukes.
April 14th, 2010 at 5:28 pm
Curmudgeon @ 5:25
What are you saying, the IRS is going to nuke the investment bankers?
(Might not be such a bad idea, actually).
April 14th, 2010 at 5:47 pm
If it is true that people making $125,000 a year (approx. within the top 10%-15% of the population) are having a hard time sustaining themselves due to crushing debt from education and shelter, what does that mean for the other 85% to 90% of the population who make significantly less than this?
Are you saying that higher education has a negative return if you need to finance it with debt? Are you saying that shelter consumes a higher proportion of income for those who make $125,000 a year as opposed to, say $80,000?
How do the mortgage interest deduction and the student loan interest deduction factor into your analysis?
If approx. $125,000 is what you need to make in order to merely get “absolutely hammered”, as opposed to financially ruined, what kind of professions are viable as a result- ie. what careers that pay $125,000.00 or more can break even after paying for education and shelter?
Are you saying that making $125,000.00 / year represents a particular level of hardship from a tax bracket perspective not experienced by those who make significantly more or less? Can you be more specific in the mechanics of this?
I know a lot of people with masters and doctorate degrees in science and medicine who make 1/2 of that amount working for industry, and 1/3 of that amount working for academia. While they have a serious debt load, they manage to afford that and pay for shelter in a high cost-of-living area, while paying taxes. It’s rather shocking to me to hear that folks making $125,000 are put into a situation that is worse off than this, which is why I would like to understand the nature of this inequity in the tax code.
April 14th, 2010 at 6:07 pm
I will not bow to pressure from Americans to change my rate.
April 14th, 2010 at 6:15 pm
What should be added is that this does not include state taxes – and that states often use the very regressive sales taxes as the main tool to get income.
April 14th, 2010 at 6:16 pm
Not the Leonhart article states in the first sentence: “That’s the portion of American households that owe no income tax for 2009.”
…that’s INCOME Taxes. Got it. That 50% number doesn’t include payroll taxes, just for starters. Here’s the other half of the story…
Two-Thirds of Tax Units Pay More Payroll Tax Than Income Tax
http://www.urban.org/publications/1001065.html
It’s more nonsense.
April 14th, 2010 at 6:18 pm
…Leonhart that is. Leonhart is promulgating more nonsense.
He’s a tool. Get his ass to comment on the blog so we can shred the doofus.
April 14th, 2010 at 6:19 pm
I can’t believe that no one mentioned the Daily Show segment from last night: <a href="http://www.thedailyshow.com/watch/tue-april-13-2010/that-s-tarifficThat’s Tariffic
April 14th, 2010 at 6:21 pm
Let’s try that again:
That’s Tariffic
April 14th, 2010 at 6:27 pm
Lets fix the alternative minimum tax. Minimum 20% on income 100K-1M, minimum 30% on income 1M-10M and minimum 40% on income above 10M. That would apply to any type of income including capital gains. Quick and easy way to fix the problems created by absurd low tax rates on the income of the rich (capital gains) compared to the income of the working middle class (salary).
April 14th, 2010 at 6:33 pm
@Spirald
LOL. You’ve taken my comment too seriously, friend. I was simply pointing out that there’s a difference between income and wealth that many seem to miss. You’ve set up some lovely straw men, but they’re yours, not mine.
I believe that wherever the government provides pools of easy money to finance purchases (as in real estate and education) we will see inflation, oversupply, and misallocation of resources. In education, these subsidies of lending introduce noise in the messages that the job market would otherwise send to our young people about which fields are in demand. This can lead to poor vocational choices—a misallocation of resources. Taking on too much debt is a human foible (hyperbolic discounting) that young people, having never worked and saved, are in a poor position to understand. When debt—non-dischargeable debt, no less–is combined with poor vocational choice you have the ingredients of a ruined (economic) life.
April 14th, 2010 at 6:37 pm
@cognos; it is even worse than that. Because payrole taxes are only payed on the type of income that regular folks earn and not on the type of income that millionaires earn (capital gains) it is not enough to extend those taxes to all income levels, they need to be extended to all income types.
April 14th, 2010 at 6:42 pm
“The wealthiest 1% will end up receiving far less than 1% of the benefits of the payroll taxes”
Dead wrong, they receive the greatest of the benefits. The social unrest that would result if people starved to death on the streets would by far hurt the rick more than the poor. Let them have social security is the new improved “let them eat cake”. No accident that it was invented just as the Communists were sweeping through Europe.
April 14th, 2010 at 7:05 pm
Why do so many people assume taxation is about being fair? It’s not about being fair, it’s about being efficient.
Capitalism doesn’t work if wealth get’s concentrated. It is a fundamental flaw with the whole system. Wealth distribution is extremely important for a functioning modern society. Progressive taxation does something to fix that. This is why hundreds of years of feudalism produced no real progress but once a middle class was created, there has been much more progress. And this experiment has been repeated in many countries, over and over again. Similarly, the reason all those small businesses aren’t recovering (per the earlier post) is because they rely on the middle class, who is being drowned in debt. The middle class simply isn’t being paid enough to consume all the goods we can produce, and the rich can’t spend fast enough to either (no “trickle down”). Thus we have a 10% official (and much higher unofficial) unemployment rate.
Unfortunately we’ve weakened progressive taxation to the point that our system has become dysfunctional. We can obviously produce more than we can buy. That was the problem a few years ago. Even if you exclude the extra “stuff” from trade deficits, we had no problem producing way more goods and services than today, but everyone had to go into debt to buy them because the middle class has too few dollars. That’s the real root of this whole economic crisis. Taxing the rich is convenient because it solves two problems at once versus going all Robin Hood which would produce the same results, but has never really been politically feasible. So spreading the wealth through government programs is more palatable, instead.
I don’t see why this is so complicated. Capitalism without wealth redistribution is a complete failure, just like socialism without reward is. Trickle down is a big lie that some idiots still believe. Even if you change to a flat tax, it doesn’t change the fact that the concentration of wealth needs to be fixed. So stop crying that it isn’t fair, because it’s not supposed to be!
April 14th, 2010 at 7:08 pm
what the hell is a “tax unit”?
sounds like “government speak”- but VD is down w/ that- probably has his own official issue of “government speak” at the ready to answer any and all questions-
Dedude-
payroll taxes are supposedly paid to pay for certain benefits a person is to receive later in life- so- to be true to that- then we must look at raising income taxes on the very wealthy if you choose to tax the wealthy-
because they are not going to get one more dime later in life than anyone else who paid payroll taxes
April 14th, 2010 at 7:16 pm
Figures do not include state income taxes which are hugely significant in several states. Based here in NYC, I have to laugh at the claims that the wealthy pay little in taxes.
April 14th, 2010 at 7:19 pm
Are estate taxes included in these calculations??
April 14th, 2010 at 7:23 pm
Doesn’t income disparity – high to low – play a part here? What were the top one percent making in 1965 compared to the bottom 20 percent – in absolute terms?
What’s the gap now?
April 14th, 2010 at 7:34 pm
@cognos: Never thought we’d agree. But here we are.
For me, the only comparison I need to know is a middle income family quickly winds up at the 35% rate, while the fat cats only pay 15% on capital gains.
That’s not right. Or good. But it feeds the WS bubbles. DUH. Guess who’s running the company.
As for the rest. Yeah, we need to take our tax code out behind the barn and shoot it.
Every year it grows with more loop holes for the insiders and exclusions for the outsiders.
When the elite can exchange billion dollar properties and walk away from the realized income, then we are not in fair tax system.
We are in Bananamerica.
April 14th, 2010 at 7:34 pm
Jack – great question!
April 14th, 2010 at 7:35 pm
@BR: Almost forgot, great post.
April 14th, 2010 at 7:37 pm
Jack – from what I can find in a quick search – the income disparity as of 2005 was higher than at any time since 1928. . . makes you think.
NY Times
Income Gap Is Widening, Data Shows
By DAVID CAY JOHNSTON
Published: March 29, 2007
Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows.
The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression.
April 14th, 2010 at 7:56 pm
thor-
and who says the “new” paradigm won’t continue? Think about it- 10% unemployment- OK- we got that- but the companies will sell to those that “have”- and will remain lean-
heavy unemployment helps keep inflation low because there is zero demand for wage increases-
QE and ZIRP can continue unabated- and keeps the Treasury’s borrowing costs at a minimum
April 14th, 2010 at 7:59 pm
@ahab: correct. The Fed has a very strong motive to keep borrowing costs low.
Otherwise.
April 14th, 2010 at 8:01 pm
DeDude @ 6:27
Personally, I don’t think that a family of four living on 100K/year in NYC, or Washington DC or San Francisco is all that rich.
April 14th, 2010 at 8:03 pm
@BR OT. Spectacular set of posts today. Thanks. Just keep eating your Wheaties.
April 14th, 2010 at 8:20 pm
Alfred – Otherwise indeed!
April 14th, 2010 at 9:17 pm
I dont know what to do with myself. I agree with much of the crowd!
Next, after the payroll tax, is capital gains.
I’d like to see a simple 20% tax on all capital gains (divs and income). Just flatten it out. There is too much shifting where senior principals take stock or options or deferred “carry” in place of what is just basic “earned income”.
Sure, I like capital gains. But I like basic wage income too. I actually see little reason to tax them differently. So 20% is just a nice step in that direction… but is incremental with where we are at.
It seems quite fair to make these 2 tax changes (payroll tax 3+3% on ALL income, 20% cap gain tax) in exchange for LOWERING the corporate tax rate to 25% (35% is too high, and few companies pay it, too many games — international shell companies and lease “sham” deductions). Why make some simple straight up companies (like GOOG) pay 35% when GE or GS or BSC are gaming to pay <10%?
April 14th, 2010 at 9:42 pm
A giant WTF to anyone who says the middle class is overtaxed because they pay a percentage of wages for Social Security and Medicare. The “unfair” tax concept had some truth when social security and medicare both capped out around $30,000 of wages. Social Security taxes hit wages up to $180,000 and Medicare wages are uncapped. The wealthy wage earners pay that 3.8% (7.6% if they own the company) on all the income. The very wealthy who get lots of income from interest and dividends will start paying that uncapped Medicare tax of 3.8% to help pay for the health care socialization plan (not reform by any means)
Benefits are extremely skewed in favor of the poor and middle class. The article says not so because someone might die before age 70 (someone will, but, it is all about the averages) As a group the middle 60% of earners will probably get five times the benefits per tax dollar paid relative to the top 20%. Does anyone know how much social security benefits go up from a $52,000 wage earner to a $180,000 wage earner? And the social security benefits are taxable for people in the top 20%. Yeh, the social security and medicare tax on these people is a burden. But, that is only because our vote buying politicians have ratcheted the benefits up too high
Using the facts as stated in the article: The middle 20% with income under $52,000 pays only 3% in average Federal Income tax or less than $1,500 per family. That is just about enough to pay for the roads they drive on and the bottom 60% get all the rest of the federal government services for free.
April 14th, 2010 at 9:50 pm
The comments on the blog post eviscerate the author for his shoddy “analysis”.
Question I have for the peasants: if the richest 10% pay 72.7% of federal income taxes and that is “not enough” then what percent of the pie would you like them to pay? 85%. 95%. 105% and we mail checks to the other 90% of the population? How much is enough?
Every citizen who expects to vote ( and authorize congress to spend our money) should be paying at least $1.00 in federal income taxes. It’s a joke that 47% pay absolutely nothing. Once it hits 51%, we will never be able to change the system.
April 14th, 2010 at 9:57 pm
You have to pitty the poor SOB who is at the bottom of the top 20%. The Democrats treat this guy/gal as if they are filthy rich. All the tax breaks and tax credits phase out for people making over $100,000 to $150,000. Anyone supporting a family of four on $150,000 isn’t doing enough investing (outside his 401(k)) to get much help from the lower tax rates on dividends and capital gains. Somewhere in the land of phased out tax credits around $150,000 when every dollar of wages is still taxed by social security the effective tax rate is much higher than the guy making $1 million a year.
The reality of paying for all those grand programs will be Obama’s “Read my lips” moment. He is going to go back and pound the people making $100,000 to $200,000. These working people on a salary can’t even hide.
One last cynical comment for you all. April might be a good month to pull the life support plug on your rich uncle. (Whow! I know it makes great economical sense, but I am just making a point. Don’t do it and then point your Cynic made me do it defense at me) Talk about a stupid tax loophole. How about dying this month with $100 million in the estate and paying zero estate tax. What are the Democrats thinking?
April 14th, 2010 at 10:37 pm
“payroll taxes are supposedly paid to pay for”
Payroll taxes are were supposed to be used to pay for poverty insurance. For the lucky rich bastards that do not end up poor the taxes are “wasted”, just like the fire insurance payed by the lucky people who’s house does not burn down is “wasted”. Even if the intend of payroll taxes was the kind of retirement accounts that the GOPsters try to sell it as, the reality is that the money is being used for general government funding so there is no rationale for keeping it off the high end of the income scale.
April 14th, 2010 at 10:47 pm
DL, according to my proposal a family of 4 with an income of 110K would pay 20% on 10K, that is 2K, as their minimum tax. Considering what we expect a family of 4 on welfare to survive on, I think they could afford that even in a high cost city.
April 14th, 2010 at 10:59 pm
@Cynic_FA, if you want to be taken serious you need to get your facts straight. Social Security taxes DO NOT hit wages up to $180,000. Somewhere between 50% and 85% of your social security benefits are taxable income depending on your income. And yes the benefits of poverty insurance is skewed in favor of the poor -duuh. And the rich have more money, and …….
April 14th, 2010 at 11:12 pm
The above arguments illustrate what a confusing disgrace our tax code is.
How the hell can we have a legitimate debate over policy when its not clear what the “effective” tax rates are relative to income?
Write off for this, but not for that. Tax credit here, but not there. This is income this, is depreciation. A friggin joke!!!!
By the way, if you go to the US Government Printing Office ( http://www.gpo.gov ), you can order a complete set of Title 26 of the US Code of Federal Regulations (that’s the part written by the IRS), all twenty volumes of it, at the bargain price of $974, shipping included.
According to the US Government Printing Office, it’s 13,458 pages in total. The full text of Title 26 of the United States Code (the part written by Congress–available for an additional $179) is a mere 3,387 printed pages, bringing the adjusted gross page count to 16,845.
WTF?
April 15th, 2010 at 1:31 am
Added overlay of National Debt
http://www.z-dog.com/debt07.jpg
April 15th, 2010 at 7:54 am
PS: and since our supreme leaders in the supreme court have decided that corporations should have the rights of individuals we should also demand that they have the alternative minimum tax of individuals. We could even tie the rate to the compensation of their CEO’s so the more outrageous that compensation is the higher alternative minimum tax rate for the company.
April 15th, 2010 at 8:01 am
The point Leonhardt is trying to make, which many of you are totally missing, is that there’s many other taxes besides federal income tax.
Very poor people don’t pay federal income tax, but they pay all sorts of other taxes. And since the dawn of the “supply side economics” movement from the Right, federal income taxes have gone down (particularly for the very rich), although not nearly as much as federal capital gains taxes. If you count things like FICA, Medicare, state income tax, state sales tax, property tax, use fees, etc., you end up with a lot of taxes that disproportionately hit the poor and disproportionately lay off the rich (taxing consumption and income, effectively, while incentivizing investment).
As far as who gets the benefits of taxation, you Righties are being ridiculous. Barring SS and Medicare (which everyone gets, not just the poor): 1) the benefits of government spending and subsidies are very hard to assess; and 2) that being said, most of them go to the middle and upper middle, or upper classes.
The relative size of things like unemployment insurance (“welfare”), food stamps, and other direct assistance to the poor is paltry, when compared to the huge subsidies given to things like highway maintenance, home mortgage and tax subsidies, investment subsidies, and the like. When you further add in things like enormously lavish defense contracts (defense being by far the largest non-”Lockbox” expenditure- i.e., it has no dedicated tax to fund it), which we all collectively “benefit from” in the abstract, but which defense contractors and their investors benefit from in the concrete, I’d argue it’s quite clear that the upper middle-to-upper classes receive most of the benefits distributed by the federal government.
April 15th, 2010 at 10:03 am
@mcmalley
This is a very important point, the employer payroll tax contribution falls partly or largely on the worker.
Not 100% on the worker though.
According Micro/labor econ 101, the tax can be viewed as lowering the labor demand curve by the amount of the tax. For any effective wage rate offered, you get fewer willing job seekers, since they get less money, and leisure, school, self-employment, off the books stuff is more attractive.
Employers hire until the marginal productivity of the next employee equals the wage rate, so they hire fewer employees at higher effective wages. So they lose out too.
- The ex-employee who leaves the labor force to say raise a child pays part of the tax.
- The employee who receives a lower effective wage pays part of the tax.
- The employer who pays a higher wage and has less output, lower profit pays part of the tax.
- The ex-employee who doesn’t get a job because he/she is priced out loses a lot.
How much the employer pays vs. the employee depends on the relative elasticities of supply and demand for labor.
The employee would only pay the whole tax is if the supply of labor is completely inelastic, ie no one leaves the labor force and everyone has to cut their wage to keep their job.
April 15th, 2010 at 11:59 am
tangential..
How do you want to do your 2009 federal taxes?
Traditional Free File – I want tax software with step-by-step help.
I Will Choose A Free File Company
Help Me Find A Free File Company
Free tax preparation and e-filing if your adjusted gross income is $57,000 or less in 2009.
Asks simple questions, puts your answers on the right forms.
Does all the math for you.
Checks for accuracy.
Get quick access to the most commonly filed federal tax forms and schedules for Traditional Free File.
Some software companies may offer state tax preparation; however, fees may apply.
File a free federal extension
http://www.irs.gov/efile/article/0,,id=118986,00.html
The Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the Internal Revenue Service and the Free File Alliance LLC, a group of private sector tax software companies. Many companies offer free or paid state tax preparation and efiling services. Some companies may not offer state tax preparation and e-file services for all states.