There is no income tax because depreciation and interest as well as other expenses lead to a tax loss higher than the cash gain. There are property taxes and other maintenance costs which are fully covered by the rent (as well as the cash-on-cash return). The property goes up in value over time.

Eventually, as the depreciation gets used up and the mortgage is paid down reducing the interest expenses, as well as higher rent -- the income will start to become taxable and will phase in over time. At that point, I can choose to 1031 exchange into a more expensive property to get even more depreciation and start the interest clock over ... or just take the income and pay taxes on it if you prefer. Sure, eventually there might be taxes ... but as a result of using 3:1 leverage safely, the gains are also likely substantially higher, too.