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Reuters | Latest Financial News / Full News Coverage: "WASHINGTON (Reuters) - More than 2,000 individuals with incomes of $200,000 or more paid zero in federal income taxes in the year 2000, according to a report released by the Internal Revenue Service on Thursday.

The report shows the percentage of tax filers with $200,000 or more in income that escaped all income tax liability was at its highest since 1994, but still remained a very small group. The report was in the IRS 'Statistics of Income' bulletin.

A separate IRS report showed the average income tax rate paid by the 400 tax filers with the highest incomes in 2000 was 22.29 percent, up from 22.23 percent in 1999 but below a recent peak of 29.35 percent in 1993.

The numbers may raise questions about the effectiveness of the so-called Alternative Minimum Tax, a method of calculating an individual's tax liability aimed at ensuring wealthy people pay at least some income taxes.

The AMT was created in 1969 in response to worries some of the rich were managing to completely avoid taxes by using tax shelters. Then-Treasury Secretary Joseph Barr told Congress that 155 individuals with incomes of more than $200,000 paid no income taxes in 1966.

In 2000, that number was 2,328, up from 1,605 in 1999. Looked at as a percentage of all tax filers with incomes of $200,000 or more, the group amounted to only 0.084 percent. That's the highest percentage since 1994, when it was 0.102 percent of the $200,000 earners.

Adjusted for inflation since 1976, the number of non-payers was smaller, at only 464, the IRS said.

Taxes can be offset by several factors, including credits for state and local income taxes or foreign taxes paid or extraordinary losses from personal businesses, experts said.

Analysts worry though that the AMT, which is not indexed for inflation, will start to affect middle-income families in coming years unless it is overhauled.

William Beach, a senior fellow with the conservative Heritage Foundation think tank, said the AMT performs 'extraordinarily poorly.'

'It has now leached into the upper middle class,' he said. Unless it is reformed, it could touch about 30 million tax filers by 2012, he said."