A new study from the Internal Revenue Service confirms your worst fears about the tax code: it’s riddled with loopholes and Congress isn’t doing anything about it. Year after year since 1977, the IRS has dutifully issued its “data on individual income tax returns reporting income of $200,000 or more, including the number of such returns reporting no income tax liability and the importance of various tax provisions in making these returns nontaxable” because Congress mandates it. And year after year, it shows that some of the very richest Americans are finding entirely legal ways to avoid federal income taxes altogether.
The new (and most recent) IRS data show that in 2009, more than 35,000 Americans* with incomes over $200,000 paid not a dime in federal income tax. For this group–less than one percent of all the Americans with incomes over $200,000, according to the study– itemized deductions and tax-exempt bond interest are among the main tax breaks that make this tax-avoiding feat possible.
High-Income Tax Returns for 2009
Source: Justin Bryan, SOI Bulletin, Vol. 31 no. 4, Spring 2012