While policymakers obsess about the income tax, they often lose sight of an important detail: For two-thirds of households, the levy that matters most is the payroll tax. According to a new report by the Joint Committee on Taxation, the 80 million tax filers making $40,000 or less will collectively pay no federal income tax and many will even receive cash payments from the IRS in 2015. But they will pay $121 billion in Social Security and Medicare payroll taxes (including the employer share, which most economists believe falls on workers). Even middle-income households—those making between $40,000 and $75,000--will pay three times as much in payroll tax than federal income tax—nearly $190 billion of the former and just $64 billion of the latter. Over all, three-quarters of these middle-income households will pay more in payroll tax than income tax, according to JCT (see Table A-7 of the report). In fact, income tax payments don’t begin to exceed payroll taxes until household incomes reach six figures, and only really dominate for those making $200,000 or more. Still, the design of the income tax very much matters to those low- and middle-income households. Thanks to personal exemptions and the standard deduction, many households making less than $40,000 can zero out their federal income tax liability. Refundable credits, such as the Earned Income Tax Credit and the Child Tax Credit, make it possible for many middle-income families with children to receive income support through the revenue code. If Congress revises the rules, the income tax liability of those households could change significantly. Many taxpayers may not even recognize the difference between the two levies, especially since both payroll and income taxes are withheld from their paychecks and the payroll tax is often listed on their pay stub under the cryptic acronym of FICA. Nonetheless, those households who pay their payroll tax but who may owe little or no income tax are often forgotten in the great tax debates in Washington. You see it in crude ways, such as the rhetoric over the 47 percent who allegedly “pay no taxes.” In fact, that number applies to those who pay no federal income tax, and conveniently ignores payroll taxes (and as my Tax Policy Center colleague Bob Williams often reminds us, the 47 percent number is hopelessly outdated. It dropped to 43 percent in 2013 and is projected to fall to barely one-third by 2024). But you also see the weight of the payroll tax ignored in more important ways. For instance, the tax reform debate often focuses on income tax rates, but for many low-income households the structure and generosity of those credits is far more important than the rates. And when reformers do address issues affecting people at the bottom of the income distribution, their proposals often are misunderstood. See, for instance the recent flap over the tax reform proposal of senators Mike Lee (R-UT) and Marco Rubio (R-FL) which focused on the very important, but technical, issue of whether their proposed personal credit would be refundable. The incidence of the payroll levy is not only important in the debate over taxes. It also is deeply entangled in the politics of entitlements. It matters when you think about the relationship between Social Security benefits and the Social Security payroll tax: For instance, it is an important issue whenever lawmakers consider whether to raise or remove the current $118,500 cap on wages subject to the Social Security levy. And it matters when you consider how to reform Medicare. While the payroll tax does fund some of the senior health program, its share is much lower than the government’s carefully constructed narrative suggests. In reality, more than 40 percent of Medicare is financed through the general fund (which is to say, mostly though income taxes). Payroll taxes support only one-quarter of Medicare Part B and 14 percent of Part D (the drug benefit). The new JCT estimates of the incidence of income and payroll taxes won’t settle any of the great debates over tax or entitlement reform. But the next time you hear a politician pontificating about either, keep the numbers in mind.