2,392 RICH AMERICANS PAID NO TAXES IN '93.Byline: David Cay Johnston David Cay Johnston is an investigative journalist for The New York Times now focusing on taxes. He received the 2001 Pulitzer Prize for Beat Reporting "for his penetrating and enterprising reporting that exposed loopholes and inequities in the U.S. The New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Times Nearly 2,400 of the Americans with the highest incomes paid no federal income taxes in 1993, up from just 85 individuals and couples in 1977, the latest available information from the Internal Revenue Service shows. While the number of Americans who make $200,000 or more grew more than 15-fold from 1977 to 1993, the number of people in that income category who paid no income taxes grew 28-fold or nearly twice as fast, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a quarterly statistical bulletin issued by the IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. . The report also shows that an additional 18,000 Americans with high incomes paid less than 5 percent of their income in taxes. And it cast doubt on the effectiveness of the Alternative Minimum Tax, which was designed to insure that the wealthy paid at least some income taxes. Tax lawyers and other tax experts said Thursday that the number of Americans with incomes over $200,000 who pay little or no income taxes certainly had grown since 1993. The IRS did not specify how the 2,392 individuals and couples were able to avoid paying income taxes, but figures in 24 pages of statistical tables it released indicate that three-fourths of them received tax-exempt interest Tax-Exempt Interest Interest income that is exempt from federal income tax. Although it is not directly taxed, this income may still be required to determine other tax calculations such as social security benefits. from municipal bonds. Because municipal bond interest is generally not taxable, the interest rates paid to owners are typically less than for corporate bonds. On one-fourth of the returns, a combination of interest deductions Interest deduction An interest expense, such as interest on a margin account, that is allowed as a deduction for tax purposes. and taxes paid to states and local governments was the most frequent reason for eliminating federal income taxes, the information shows. Income taxes paid to foreign governments, which generally are offset dollar for dollar against U.S. income taxes, were the primary reason no taxes were due in about one-fifth of the cases. Losses from limited partnerships and S Corporations were also major reasons that no taxes were due. These types of business entities pay no income taxes, but money taken from them is included in the taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. of partners and owners. Economists and others experts interviewed Thursday said they also believed that falling audit rates were a significant factor in explaining how people making $200,000 or more could pay little or no income taxes. Experts also said the IRS's figures raised questions about the effectiveness of the Alternative Minimum Tax, which Congress adopted in 1969, after an outcry over the disclosure by Treasury Secretary Joseph Barr Joseph Barr is the name of:
The Alternative Minimum Tax is a separate income tax system that allows fewer deductions and exemptions than the regular income tax. In 1986 Congress strengthened the Alternative Minimum Tax and shut down most tax shelters. Henry Aaron, a Brookings Institution Brookings Institution, at Washington, D.C.; chartered 1927 as a consolidation of the Institute for Government Research (est. 1916), the Institute of Economics (est. 1922), and the Robert S. Brookings Graduate School of Economics and Government (est. 1924). economist, said the 1986 changes did not go far enough to eliminate differences in how various investments were treated for tax purposes. He said that having so many Americans with high incomes paying no taxes ``is highly demoralizing'' and will weaken support for the income tax system. CAPTION(S): 2 charts CHART: (1) People with high incomes... (2)...Who paid no taxes |
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