Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, June 30, 1993                   TAG: 9306300115
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A1   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

INCOME: $200,000+; TAX OWED: ZILCH MORE HIGH-EARNERS THAN EVER FIND WAYS TO

The Internal Revenue Service says 779 couples and individuals reported earning more than $200,000 on returns filed in 1990 and paid no federal income tax. They earned $340 million, an average of $436,000 apiece.

The number of high-income nontaxpayers almost doubled from 397 a year earlier and was the highest since the IRS began publishing the reports on orders of Congress in 1977. But they still represented only about 1 of every 1,000 filers at that income level.

"The number of all returns - taxable and nontaxable - with incomes of $200,000 or more has risen substantially, [but] the percentage of nontaxable returns has not changed as significantly," the IRS concluded.

The major tax bill making its way through Congress apparently would do nothing to bring the 779 onto the tax rolls.

The measure, designed to reduce the budget deficit, would increase the top tax rates on high earners, raising the tax burden on the average more-than-$200,000-a-year filer by about $25,000. But those who use legal deductions and credits to wipe out their tax liability would not be touched.

"Only in the wrong direction" would the bill change the number of nontaxpayers, Robert McIntyre, director of Citizens for Tax Justice, a labor-financed research group, said Tuesday. The number could be increased, he said, by provisions affecting charitable contributions of appreciated property and deduction of losses on some passive real-estate investments.

The best tax shelter continues to be the tax-exempt bonds issued by states, cities and counties to finance schools, roads and other public projects. The IRS estimated that 492 over-$200,000 earners had tax-exempt interest averaging $392,000.

On average, the biggest single factor in eliminating tax liability is losses from partnerships and businesses organized as Subchapter S corporations. Such losses were listed on 232 of the 779 untaxed high-income returns and averaged $500,000.

The 779 also escaped the "alternative minimum tax." That is a levy designed specifically to ensure that all high earners pay some tax even though legitimate deductions would wipe out their regular tax liability. But the tax does not apply to deductions for interest, casualty losses and medical expenses, which most of the 779 claimed.