Higher Federal Taxes courtesy of BushCo

[ariellyn]

Local news just reported that a huge federal tax increase is on the horizon and most Americans don't even know it.

The AMT doesn't allow deductions for state/local taxes or children. Who will pay this tax once set aside for the wealthy? Thirty five million more middle class American families will pay hundreds to thousands more in taxes in the next five years if they make a combined income of 75 to 100K per year and have children. Today, only 2% of families in this category pay AMT.

AMT requires that you calculate your taxes two ways--the standard way and using AMT formulas. You have to pay the HIGHER of the two.

If it's hard work putting food on your family, it just got harder.

[camitche]

1. that can't be.

President Bush assured me many times that tax cuts weren't going to unfairly benefit the elite one percenters. /sarcasm

[solinvictus]

2. AMT?

What does it mean?

[ariellyn]

3. Alternative Minimum Tax n/t

[NMDemDist2]

4. "Alternative Minimum Tax"

google it and shudder

[PA Democrat]

7. It was originally designed to prevent the wealthy

from claiming so many deductions that they paid little to no taxes. But it has been "tweaked" over the years and has turned into a middle class tax, rather than one for the wealthy.

If you have a lot of deductions on your schedule A: high state and local taxes, high home interest, high medical expenses, combined with child tax credits it basically gradually takes away the amount of the deductions it will allow, and in effect raising your overall tax liability. I hope that makes sense.

David Cay Johnston explains it well in his book Perfectly Legal: The Secret Campaign to Rig Our Tax System to Benefit the Super Rich - and Cheat Everybody Else.

[Yupster]

10. The Alternative Minimum Tax was passed in 1970

The idea was to stop rich people from paying no taxes by canceling all their income out with deductions.

The problem is that the numbers aren't indexed for inflation, so the person making $ 75 k per year in 1970 who was truly rich was a target. The $ 75k number is still there, but due to inflation, that person is today far from rich.

Therefore, as inflation and income levels creep ever higher, the AMT captures more and more American families every year. What started off as a tax on the rich has now creeped into a tax on the middle class.

I guess the answer would be to index the income number for inflation each year, but if Bush suggested that, wouldn't he be pilloried for suggesting another tax cut that would just help people making over $ 75 k per year, or in other words, another tax cut for the rich?

[punpirate]

5. And, the truly nasty part of this...

... is that it doesn't really apply to the very wealthy, nor to corporations any longer (some 60% of corporations paid an effective rate of 5% or less in the last tax year for which figures are available). Those groups are the ones for which the AMT was intended.

The Bushies don't want to do anything about the AMT, since it will make their very bad deficit problems even worse, even though indexing the rate structure for inflation would pretty much make the problem go away for most middle-income wage earners.

[ariellyn]

6. How will AMT make the deficit worse? I'd think it would make

it better by giving them more of our money. Of course, I don't think they'd put the extra money towards the deficit--they really don't care if it escalates.

[PA Democrat]

8. It would help to reduce the deficit by shifting a greater share of the tax

burden to the middle class. It's more a matter of tax fairness than anything else.

[ariellyn]

11. Are you saying it's fair to burden the middle class with more

responsibility for the deficit as opposed to the wealthy for whom the AMT was intended and who have the means to bear the burden?

[PA Democrat]

12. No, I should have made that clear though.

That's what happens when you write things when you're only half awake!
AMT screws the middle class.

[punpirate]

9. What I mean...

... is that the Bushies don't want to fix it by indexing it to inflation from its time of inception. Leaving it as it is brings in more revenue, albeit at the expense of the middle class, rather than at the expense of the groups for which the tax was intended.

Cheers.