Over 2,000 US High Income Earners Paid No Tax In the Year 2000

by Leroy Baker, Tax-News.com, New York

30 June 2003

Figures contained in the IRS's recently published statistical bulletin have revealed that over 2,000 individuals with incomes over the $200,000 mark paid zero tax in the year 2000.

According to the IRS data, of the 2,771,577 income tax returns with AGI (Adjusted Gross Income) of $200,000 or more, 2,328 (0.084 percent) showed no US income tax liability; and 2,022 (0.073 percent) showed no worldwide income tax liability. For 1999, there were 1,605 returns (0.067 percent) with AGI of $200,000 or more with no US income tax liability; and 1,398 returns (0.058 percent) with no worldwide income tax liability.

The spring 2003 update of the IRS income statistics bulletin has also revealed that the proportion of federal income tax paid by the top 400 earners in the United States has also fallen with the average rate equivalent to 22.3% in 2000, down from 26.4% in 1992, and significantly lower than the 29.9% peak reached in 1995.

The figures have raised further doubts about the effectiveness of the Alternative Minimum Tax (AMT) which was introduced in 1969 to sweep more wealthy people into the tax net, and which is threatening to punish more people on middle incomes.

Single people earning under $33,750 per annum and married couples filing a joint return of less than $45,000 will be generally exempt from the alternative tax. However, once income climbs above these amounts, depending on the amounts and nature of any tax credits claimed, the tax starts to kick in at a rate of 26%, rising to 28% on incomes above $175,000.

However, three years before AMT was enacted in 1969, only 155 individuals with incomes above $200,000 paid no income tax, illustrating the ineffectiveness of the AMT

It is a tax that William Beach, a senior fellow at the right wing think tank the Heritage Foundation, says performs "extraordinarily poorly" according to a Reuters report. By 2012, Beach estimates it could effect up to 30 million tax filers.

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