As noted in the forthcoming issue of Research Reports, the fact that 155 tax filers with adjusted gross incomes of $200,000 (around $1.3 million at today’s prices) or more paid no income tax for the year 1967 provided the impetus for enactment of the AMT (alternative minimum tax).

As far as we are aware no effort has ever been made to really understand how high-income taxpayers avoid paying taxes beyond a blithe assumption that they make extensive and excessive use of tax-favored investments and transactions.

Because the Internal Revenue Service is not permitted to disclose individual tax returns, there is no evidence that any of the 1967 tax filers with high incomes and no taxes due were included in the similar counts for other years. We have long suspected that those filers reporting high incomes and no tax liability for any given year have, in fact mis-managed their tax planning—that some other timing of their income, deductions and exclusions would have resulted in less total taxes paid over the years.

In any event, it is clear that the AMT has done little to end the perceived problem. In 2004 (the latest year for which detailed data are available) there were 196 tax returns filed with adjusted gross incomes of $1 million or more and with no tax due.

To subscribe to Research Reports, become an Annual Sustaining Member.

Bookmark this article: