Why Thousands of Millionaires Don’t Pay Federal Income Taxes

Washington Post: “About 46 percent of all tax filers (individuals or households) pay no federal income taxes each year because of various exclusions. High-income tax filers make up a tiny portion of that number, but they are by far the biggest beneficiaries. More than half of the tax revenue lost to the most common tax exclusions stays in the pockets of the richest one-fifth of Americans, according to an analysis by the Congressional Budget Office.”

“While it’s rare for high-earners to pay no federal income tax, it’s not unheard of. In 2011, for instance, about 433,000 tax filers with incomes over $100,000 paid no federal income tax, according to estimates based on limited IRS data by the Tax Policy Center, a nonprofit think tank. That number includes approximately 4,000 filers with an income of $1 million or more.”

The most costly loopholes: individual retirement accounts not subject to federal taxes, interest on municipal bonds, and reduced tax rates on capital gains.

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