With Tax Break Expired, Middle Class Faces a Greater Burden For 2006

[Bush_Eats_Beef]

By DAVID CAY JOHNSTON
Published: April 16, 2006

http://www.nytimes.com/2006/04/16/us/16tax.html

As millions of Americans rush to meet the Monday deadline for reporting how much tax they owe on last year's income, a stealth tax increase has begun eating into the 2006 income of nearly 19 million households. Unless Congress takes action, one in four families with children — up from one in 22 last year — will owe up to $3,640 in additional federal income tax come next April.

Few of them realize that their taxes have increased, because Congress has not voted to raise taxes. Instead, Congress let a tax break expire. That break limited the alternative minimum tax, which takes back part of the tax cuts sponsored by President Bush.

Mr. Bush has asked Congress to temporarily restore the tax break, known as the A.M.T. patch. He has also asked Congress to extend another break that lowered the tax rate on most investment income to 15 percent.

Leading Republicans and Democrats agree that there is simply not enough money to do both. Congress was unable to reach an agreement on tax breaks before adjourning for vacation earlier this month.

[Massachusetts]

1. Middle Class

Bend Over! (Again)
Question: When does the "Sleeping Giant" (middle class), wake up and stand up straight?

[BiggJawn]

2. More proof that I'm not "Middle Class" anymore.

That AMT kicks in when your adjusted gross is what, $75,000?
That's twice what mine is.

I'm Poor, I'm Poor, I'm Poor...

[wordpix2]

9. you and me, both

[1932]

14. married or single?

[Ready4Change]

3. BS.

When these so called "tax cuts" were put in place I didn't see a dime of it, and I'm well into the zone of middle class income. This year I'm getting just as much back. That's in terms of percentages of income. The final amounts have changed because my income changed, but the rates are constant.

It's the RICH who got tax cuts, and the rich who are facing a restoration of that tax burden.

[leesa]

4. Welcome to my world. I don't have kids, I received no tax break at any

time. My taxes just go up and up.

[RebelOne]

10. Same here. My kids are grown now.

I didn't see any improvements in my taxes due to the so-called tax breaks. I pay throughout the year and at the end of the year, I still pay.

[bluestateguy]

5. The AMT needs to be adjusted

Every year that it isn't more and more people are bit in the ass by it: people who make $75,000 with 2 kids are not "rich".

[MADem]

6. No shit!!!

And local taxes have gone up too...welcome to BushCo, where only the rich survive.

[happyslug]

7. AMT kick in when you earn more than $112,000

http://www.irs.gov/pub/irs-pdf/f6251.pdf

With Median Income about $43,000 how can $112,000 ($150,000 for a married Couple) be "Middle Class"? I am sorry even with inflation, $112,000 is NOT Middle Class but Upper Class. In my opinion Middle Class ends no higher than twice Median Income which would be about $95,000. Remember median Income is that point where 1/2 the population is earning less than that number and 1/2 is earning more (Through the IRS does NOT count people earning more than $1 Million Dollars for so few people earn that much money per year and the number just pulls up the median income to high on a per person basis).

Now this is income BEFORE deductions, but it is still a very High number even for Gross Income. Even here the IRS gives the taxpayer a deduction of $40,250 ($58,000 for a Couple). Remember the AMT covers those people who have HIGH deductions from high income.

[Mountainman]

11. I disagree, $112,000 is not high income. You may make much less but that

doesn't make it high income. If you take the price of housing and other necessities into account and use an inflation factor, that "high income" doesn't buy what it did when the AMT was put in place.

I'm sorry you are poor but that is no reason to want to sock it to others who may be a little better off.

[BiggJawn]

17. Oh, horseshit!

"... If you take the price of housing and other necessities into account and use an inflation factor, that "high income" doesn't buy what it did when the AMT was put in place."

Like us who make 1/3 of that get a huge break on OUR "necessities"?

$40,000 doesn't buy what it used to, either, but I guess a low income is justified by the fact that those of use who settle for such poverty wages couldn't fully appreciate a $60,000 vehicle and $300,000 house, anyway.

Maybe the ATM is actually your fair share in appreciation of how GOOD Murka has been to you to let you earn 3X what I do?

Typical rich guy, they gripe about having to pay ANY taxes, thus stating a desire for the Poor to bear the full cost of this ponzi scheme that's been so good to them...

[1932]

19. AMT will hit 19 million taxpayers -- 12 million of them have kids.

That's 25% of taxpayers who have families with dependent children (up from less than 5% this year). That definitely reaches down into the middle class. Can't we find a way to raise money that falls more fairly on the population?

[BiggJawn]

20. So millionaires don't have kids?

Us poor people have kids, too, in case you haven't been to Wal-Mart lately.

I'm an empty nester now, but I raised my daughter on a whole BUTTLOAD less than $112,000 a year, let me tell you.

[1932]

23. Read the article? Millionaires contribute 1/10th of 1% of AMT revenue

coming from this increase, which is going to hit many many many more people than the 2005 AMT hit.

It hits people between 50K and 200k. Millionaires don't pay it because their income is from low-taxed unearned income.

"Just one-tenth of 1 percent of the increased alternative tax is being paid this year by those making $1 million or more, the Tax Policy Center estimates, even though this is the only group affected by the original version of the levy."

[DBoon]

21. Are we bitter enough?

Typical rich guy, they gripe about having to pay ANY taxes


I didn't get this from the prior poster at all.

Sounds like you have a much harder time living on your income than you care to admit. I'm sorry this is the case, but it is not a reason for you to distort income statistics and to misrepresent the purpose of the AMT.

The $112,000 was established in 1969, and has not been raised since 1969. In 1969 dollars, $112,000 would be an income of over $600,000. This is the income bracket to which the AMT was supposed to apply. The AMT (unlike the rest of the tax code) has NOT been indexed for inflation since 1969. An increasing number of people fall into it. An income of $112,000 today would be the equivalent of about $20,000 in 1969.

See http://data.bls.gov/cgi-bin/cpicalc.pl if you'd liek to make some calcualtions of what inflation has done to incomes over the years

[Cobalt Violet]

22. Both are still in the top quintile.

"An income of $112,000 today would be the equivalent of about $20,000 in 1969."

[BiggJawn]

38. Hey, thanks for the link!

In 1980, I made what would today be worth $60,000. Today, I make what would have been worth a little over $17,000.

25 years+ in the work force, a minor Degree, and I make virtually 2/3 what I did smacking 2 buttons on an assembly line 2 decades ago, a job that didn't even require a HS Diploma.

Wouldn't *YOU* be "bitter"?

[Mountainman]

25. I earn three times what you do because of a lot of hard work on my part

I worked full time while earning an education and have put in a lot of time on the job getting experience. I have much more respocibility than my co-workers and much more stress.

[BiggJawn]

36. So you're saying I'm "lazy"?

Mountainman, that's exactly the bullshit I used to get fed by the Reaganite yuppies back in the 80's.
"I don't know what your problem is, I'm doin' just fuckin' fabulous. You must be lazy or stupid or something..."

I work hard, too. I have a degree, too. And I'll bet your 112 kilobucks goes a lot farther towards salving your strees then my 40.

[cap]

30. it depends what area of the country you are in

in some major metro areas... $100K is very moderate middle class. in other areas, its a fortune

[BiggJawn]

37. It's a fortune here.

People around here who make 100 grand are either college professors or ReTHUGlican Entrepreneurs.

[1932]

15. That's 112K for TWO people. If median inc. is 43K, your med. couple is 86k

and that's real close to the AMT threshold.

[happyslug]

24. AMT for a MARRIED COUPLE is $150,000.

If you are NOT married each partner gets the WHOLE $125,000 deduction.

[1932]

27. I'm not sure that's right.

Currently, the exemptions are only $58,000 for married couples filing jointly and $40,250 for singles. And they would be even lower if Congress every year did not vote through a "patch."

Really high earners may not even get the full exemption since it is phased out above certain income levels.

The phase-out for married couples filing jointly begins at $150,000 (after the deductions that are allowable). The deduction shrinks by 25 cents for every dollar earned above that amount until finally, at $382,000, there is no exemption at all.

http://money.cnn.com/pf/101/lessons/18/page7.html

Are you confusing the exemption with the phase-out of the exemption? The exemption is not very much more for married couples than it is for singles, and it's nowhere near double.

[happyslug]

41. No I am talking about when the AMT kicks in.

Technically the AMT applies to EVERYONE, even people earning Minimum wage. While technically the AMT applies to everyone, the number for GROSS INCOME used under the AMT (i.e. Income BEFORE deductions) was set at 112,000 (150,000 for a Couple) so that the AMT does NOT it apply to the vast majority of people.

You are correct that it phases out as income goes up, but I am just pointing out WHO is affected by it and given Median Income is 43,000, $112,000 GROSS income is NOT middle class as the term "Middle Class" is generally used in the United States (Where the term is used for that Majority of people who earn around $43,000 or roughly people earning between $20,000 and $90,000 a year).

The concern is when the AMT was adopted in 1969, $125,000 was a lot of money (In today's terms over $600,000) but do to inflation more and more people GROSS INCOME is exceeding 125,000 (or $150,000 for a couple).

Now the AMT is not a true Gross Income test, Gross Income for Income tax purposes is sales less cost of goods sold (Both the labor to sell the product or service and cost of the product or Service). From Gross Income Congress permits people to take certain deductions. These are added back in the calculations for the AMT. One of those deductions is the deductions for Children.

What is happening is that do to inaction by Congress in passing a statute exemption the Children Deduction from the add back provision of the AMT (To get back to Gross Income as that term is used in the Tax Code) more and more taxpayers with income from investments are coming under the AMT. This is the "problem", if inflation really picks up you may even see the AMT hit real middle Income people, but that is NOT happening TODAY.

[Mountainman]

8. What does having kids have to do with it? I get hit with ATM and have no

kids.

People with kids already get a tax break.

[1932]

The child-related deductions will now be captured back by AMT.

The point of AMT is that deductions you had that reduced your income are captured back if you make above a threshold amount. It used to be that mortgage interest deduction was not captured back. It was for 2005. Next year child-related deductions will be captured back by AMT. People with children are losing their deductions.

[NVMojo]

12. it seems like there is no one out there looking out for the middle class

just like there is barely anyone out there looking out for the poor. We are all just disposable pieces of crap or wallets for the GOP.

[lovuian]

13. What is the middleclass there is no middleclass???

Only the super rich benefit from this...

[WhiteTara]

16. very sneaky aren't they!

bully boys of the school yard. I'll bet there were some high fives when they figured that one out. More for us and less for you, na na na.
IMPEACH BUSH AND SEND THEM ALL TO THE HAGUE!!!

[1932]

18. Bullshit logic alert:

From the times article:

"Representative Dave Camp, a Michigan Republican who was chosen by his party to advocate for extending the investment tax break, pointed out that it affected more people than the increase in the alternative minimum tax. About 30 million taxpayers get dividends, while nearly 19 million are expected to pay the A.M.T. on 2006 income."

Something like 90% of stock in America is held by 10% richest Americans -- and the richer you get the more money you get from investment income. The AMT hurts people who make from 50k to 200K.

The times adds: But many of the dividend checks are quite small. The investment tax savings in 2006 will be heavily concentrated on about 234,000 households, generally headed by someone 50 or older, with an average income of $2.6 million, more than most Americans earn in a lifetime. By comparison, most of the increase in the alternative tax is being paid by about 12 million families with children.

[Rex]

26. Wow look at that sound economic policy!

Lurking repukes...I hope all 3 thousand goes to your household and you have to pay every penny next year! You all fucking deserve it!

[SoCalDem]

28. Tax cut policy working perfectly.. After reading this thread, I can see

that the further dividing has progressed, right on schedule..

Congress has had PLENTY of time to adjust this for inflation...but WAIT!! they claim thre IS no inflation, so if they actually adjusted it, they would have to admit lots of things..like the fact that people are not doing all that well, and the bracket creep is making lots of people uneasy..And that the economy is in the shitter..


They also love to see people who should be on the same side, fighting over who has it harder, and who deserves tax breaks more.

[alfredo]

29. We need to frame this issue.

How can we turn this on congressional Republicans? (in ten words or less)

[SoCalDem]

31. republicans only care about rich people

[alfredo]

42. Let's find a new way to say that.

[Jazz2006]

32. I'm having a hard time getting worked up about this....

It seems that I pay more in taxes than a whole bunch of people earn in a year, but I don't mind paying taxes, since if I didn't, it would mean my parents would have to come and live with me.

Flippant? Sure.

But also true? Yes.

[SoCalDem]

33. Same for my son and his wife.. They have NO kids

and between the two of them, they earn about $400K a year.. They pay through the nose, but they also live a very good life, and have everything they want or need, and both have pension plans AND well-stocked 401-ks. They pay a lot of taxes because they make a lot of money..

[Jazz2006]

34. Like I said,

I'm having a real hard time getting worked up about this.

[salin]

35. I think it is the irritation at people earning less - paying more

than those making a whole lot more. The reach down of the ATM (going down to singler earners at $75,000 next year) - while the increased tax decreases on investment income meaning that the really wealthy who are not taxed on earned income (as in wages) pay significantly less (percentage wise) than those who earn $75,000.

I get the irritation - had it back when I did non profit work in DC and paid taxes (with no gripe - I was used to living on little) - til I learned that in that part of the Reagan era - big defense contractors/corproations not only paid 0 taxes - but had a net 'tax' gain ... as in the got money rather than paid money. That irked me. Rather feel the same on this.

[Virginian]

43. Was that what they called Corporate Welfare?

"Taxes are the price we pay for a civilized society."

Can I pay more to make it more civilized? I only wish it worked that way.

[jamesinca]

39. anybody want to bet which one gets extended

I am almost willing to bet that the investment income one passes and there is argument over the ATM.

[spotbird]

40. This middle class person is fearless

about increasing taxes due to the expiration of the tax cuts. My courage in this area knows no bounds.