Many rich who don't pay taxes

Bruce Bartlett held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.

Note that investors can deduct losses from previous years from their taxes in years when they make a profit. But Reagan took away income averaging for ordinary people.

http://economix.blogs.nytimes.com/2011/06/28/who-doesnt-pay-federal-income-taxes-legally/

June 28, 2011
Who Doesn’t Pay Federal Income Taxes (Legally)
By BRUCE BARTLETT

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¶Surprisingly, a not insignificant number of those who are clearly well off are also among the “lucky duckies.” There are 78,000 tax filers with incomes of $211,000 to $533,000 who will pay no federal income taxes this year. Even more amazingly, there are 24,000 households with incomes of $533,000 to $2.2 million with zero income tax liability, and 3,000 tax filers with incomes above $2.2 million with the same federal income tax liability as most of those with incomes barely above the poverty level.

¶It is not because of the earned-income tax credit or the child credit that the ultra-wealthy are paying no federal income taxes.

¶One reason, undoubtedly, is that capital gains are a huge percentage of their income and they may have losses from previous years to offset any realized gains this year. Perhaps some chose to invest all their wealth in tax-free municipal bonds.

¶And, of course, a large industry of tax lawyers make their living advising the wealthy on how to minimize their tax liability by exploiting existing provisions of the tax law.

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Perhaps the right and left can at least agree that it is unseemly for those in the top 1 percent of income distribution, with incomes at least 10 times the median income, to pay no federal income taxes. It’s not socialism to ask them to pay something.