A study from the Internal Revenue Service has found that one out of 189 high earners in the US paid no income tax in 2009. That is, 10,080 households who reported adjusted gross income of at least $200,000 annually — 0.26 percent of high earners — paid no income taxes in the US or to other countries. It is further reason to support President Obama’s “Buffett rule,” which would tax high-earners at a rate of 30 percent or higher.
The IRS also reports that the number of high earners who paid no taxes rose from 0.51 percent to 0.53 percent. Under US tax law, citizens must pay US taxes for income earned around the world; they do receive tax credits for payments they make to other governments.
The number of households whose income exceeded $200,000 feel from 2008 (4.4 million households or 3.1 percent of the population) to 2009 (3.9 million households or 2.8) percent.
High earners are able to avoid paying taxes — even the alternative minimum tax, established in 1969 after 155 people earning $200,000 were found to have paid no taxes — through a variety of legal means including deductible charitable contributions, the exclusion for state and local government interest (“tax-exempt interest”), medical and dental expenses and other items. Via the Buffett rule and other proposals, Obama has supported limits in precisely these areas, deductions and the tax exemption for municipal bond interest. As the IRS report notes,
“High-income returns are more often nontaxable as a result of a combination of reasons, none of which, by itself, would result in nontaxability.” (p. 15)
A chart on p. 16 of the IRS report shows the primary reasons for no tax liability in 2009.
Overall the IRS found that there were 35,061 households, or 0.88 percent, that paid nothing.
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