Falling Into Alternative Minimum Trouble

[54anickel]

http://www.washingtonpost.com/wp-dyn/articles/A36988-2004Mar6.html

As a reporter, I had covered every jot and tittle of last year's $350 billion tax cut, so it was with some relish that my wife loaded up our tax software last month to learn just how generous President Bush would be to us with our tax rebate.

Then came our answer: What George W. Bush had bequeathed, the alternative minimum tax had rescinded, to the tune of $2,143. The parallel income tax system, enacted more than 30 years ago to ensure the rich paid their fair share, had bitten us hard.

We are not alone in our frustration, especially in the Washington region, where the AMT will loom far larger this year than in lower-tax, lower-cost areas of the country. The Vietnam War was still boiling when an outraged Congress learned that 155 taxpayers with taxable incomes over $200,000 had paid no federal income tax in 1966. That led to the first "add-on" tax, a concept that would morph into the AMT.

Outraged lawmakers back then probably did not have in mind a reporter and his editor wife, but outrage leads to haste. When the AMT and its precursors were enacted, Congress neglected to allow its thresholds to rise with inflation, the way ordinary tax brackets do. So as incomes and costs of living rose, more and more taxpayers were ensnared.

more...

[papau]

1. So those that pay less than 26% get hit is the problem - no - the problem

is the structure of the AMT -

currently the deduction removal for large families can put you in AMT.

The solution is to tax the rich more and leave the AMT adjustments to capital gain rates, wierd investment, and non-taxable income being made taxable.

The AMT $450 billion Bush wants for "fix" just makes the rich screwing the middleclass problem worse.

[54anickel]

2. What is Shrub's proposal to "fix" this any way? Afraid I've not paid

much attention to him on it. I didn't realize that local income and property tax could not be used as deductions for AMT until I read this article.

I must admit my ignorance on the issue.

[ramapo]

3. Check out this Brookings report

I don't believe that Bush has proposed a fix. It would be too costly and would jeopardize his tax cuts to the rich.

http://www.brookings.edu/views/op-ed/gale/20040121taxcuts.htm

You'll find pointers to more in-depth look at the AMT. Also pick up a copy of "Perfectly Legal" from your library. I'm reading it now. It has so many good examples of how the middle class has been screwed by Republican tax policy

[54anickel]

5. Thanks for the link, and yes, Perfectly Legal is on my list of books to

read. I saw the author on Lou Dobbs the other night, he was great - very interesting interview and he's a Repug!

[papau]

7. Bush proposed fewer folks be affected by AMT in the future

Bush staff suggested that a reduction in AMT rate would accomplish this

Such reduction costs out at $450 billion minimum

There are news reports of a decision by Bush and staff to not press any AMT issue before election.

So - you are correct - Bush has not proposed a specific solution.

But the Brookings report you refer to and its "natural AMT reform" ..to extend expiring AMT provisions, index the AMT for inflation, and allow dependent exemptions to be counted against the AMT, moving all but 5 million households off the AMT by 2014 (compared to 3 million AMT payers today) would per Brookings reduce revenues by $452 billion over the next decade, and raise the deficit (including interest payments) by $572 billion.

450 or 452 billion - the point is that this is on the Bush agenda - and not in a way that reverses the steal from the middle class and give to the rich Bush plan of the last 3 years

[papau]

4. Only proposal is to lower AMT rate so it affects fewer folks - at a cost

of $450 Billion

Changing structure accomplishes the same "affect fewer people" without the cost - but the game is an additional reduction in the tax on the rich.

[54anickel]

6. Sounds like a catch 22 game then doesn't it.

[papau]

8. Yes - the point of the AMT - that no rich person/corp pay zero because of

loopholes - is missing in the current AMT.

The rich pay nothing because we declare their income more important than a working mans wage.

So investment income are not counted when correctly structure -and capital gains get breaks - are not counted At all or counted at a 20% is usually the tax rate - automatically, as personal corporations hide personal income from ever getting taxed.

We have the Dem idea of a world wide tax on world wide income - and are the only country to have that approach - but it has been screwed by the non-enforcement of IRS rules.

John Kerry ... call me ... we have to talk!

Or at least have someone on staff read "Perfectly Legal" - a book I should have written if I had any writing skills - he does not go into Wall Street Depth - and confidentiality agreements most likely prevent him from doing so even if he knew the details - but he reveals and then explains very well the general concept of what is going on.