(NEW YORK) MintPress — Charitable donations, medical fees and non-reimbursed employee expenses are all part of the miscellaneous deductions that more than 10,000 Americans earning over $200,000 in 2009 used to avoid paying any taxes.
According to a new study by the Internal Revenue Service, the percentage of taxpayers that year with an adjusted gross income in excess of $200,000 who paid no taxes increased from 0.51 percent to 0.53 percent, meaning that one in 189 high earners gave nothing to Uncle Sam.
Nearly 4 million households, or 2.8 percent of the population, were at that income level.
“High-income returns are more often nontaxable as a result of a combination of reasons, none of which, by itself, would result in non taxability,” the IRS wrote in its latest annual report.
The report comes as the debate over the U.S. tax code heats up ahead of the 2012 election.
Divisions over raising rates
In 2011, President Barack Obama proposed the so-called Buffett Rule, which would impose a minimum rate of 30 percent on taxpayers making more than a million dollars a year and could limit some of the deductions the rich use to reduce their tax load.
In a statement released in January of this year, the White House said that “no household making more than $1 million each year should pay a smaller share of their income in taxes than a middle class family pays.”
A Senate bill backing the rule passed in April with 51-45 votes, but was stopped by a Republican filibuster requiring the needed votes to reach 60.
Nearly every elected Republican lawmaker has, in fact, opposed the proposal. Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee, who has advocated cutting food stamps and other social services as a means of reducing the budget deficit, labeled it class warfare and said it would hurt job creation and investment.
Said billionaire George Soros, “Speaking as a person who would be most hurt by this, I think my fellow hedge fund managers call this class warfare because they don’t like to pay more taxes.”
In the meantime, tax experts are warning of more turmoil, and a bigger tax burden for middle class Americans, if legislators don’t act to prevent some major changes in the law that will be automatically triggered at the end of this year.
Among them could be the end of stimulus tax cuts. In the wake of the financial crisis, President Obama, with the help of a Democratic Congress, enacted an economic stimulus bill that included an expansion of the earned income tax credit, an increase in the child credit from $500 to $1,000 per child and an extension of the American opportunity tax credit.
In December 2010, during a lame-duck session, Congress and the president agreed to keep most of the cuts in place until the end of 2012.
Also on the agenda: the upcoming expiration of the 2001 and 2003 Bush tax cuts, the most notable of which were the reduction in the capital gains and dividend rates to 15 percent.
Economists Peter Orszag and William Gale described the cuts as reverse government redistribution of wealth, shifting “the burden of taxation away from upper-income, capital-owning households and toward the wage-earning households of the lower and middle classes.”
President Obama and Congress are gridlocked over these measures, and the coming election is likely to only heighten tensions.