Some Rich Are Still Paying No Taxes, IRS Says

Being rich and avoiding federal income tax is not as easy as it used to be.

But 397 couples and individuals, with incomes of $200,000 or more, found a way on returns filed in 1989, the Internal Revenue Service said Tuesday. The average income for the group: $575,000.

An additional 4,192 high-income filers paid less than 5% of their earnings in taxes, 8,495 paid 5% to 10% and 19,114 paid 10% to 15%.

The 397 who paid no tax in 1989 compares to 472 in 1988 and 595 in 1987.

That is no accident. Laws enacted in 1981 and 1986 slashed tax rates dramatically on top earners while reducing their ability to shelter income from taxation.

But the new report shows that shelter opportunities still exist. The biggest: tax-exempt interest, most of it from city and state bonds. The IRS said 184 of the high-income non-taxpayers reported tax-free interest of $98.6 million on returns filed in 1989.