With Tax Season Comes the Dreaded Alternative Minimum Tax
If you don't know what the AMT is then you had better learn because chances are it will be affecting you in a major way soon enough. The AMT was originally created in 1969 to ensure that about 150 high income households actually paid some tax. These households had enough deductions to make their tax liability $0 despite having significant incomes.
Unfortunately, they never indexed the AMT to inflation so the amount of income that a "high income household" must earn before getting hit by this 26% flat tax keeps getting lower and lower every year. The government estimates that by 2010 over 30 MILLION taxpayers will get hit by the AMT. And let's call this what it really is - a HUGE tax increase. Go ahead and look at what you paid this year and I'll almost guarantee that you are nowhere near 26%.
The AMT just affected someone I know. He makes good money but I certainly wouldn't call him wealthy or rich by any means. He has 5 kids and a good sized house to go w/ that. Because of these deductions and his moderately high income he was hit by the AMT. The increase in his tax bill was over $5k - obviously he wasn't prepared for this. This guy isn't rich - he has to put 5 kids through college. He doesn't have any stock options or any such perks. He's just a working Joe trying to making a (upper) middle class living.
Is this really the type of person we want to raise taxes on? The middle class is supposed to be the backbone of this country and now we're going to bleed them dry through a dramatic tax increase?
The REAL reason this hasn't been changed is because it would affect ALL the budget numbers. All the budget (including the ones making the President's tax cuts permanent) analyses assume the AMT will continue as planned. If this is removed then there will be a fiscal shortfall (worse than there is now) and there will be pressure to rescind some of the current tax cuts and/or control spending.
Due to inflation, this issue gets more and more attention every year and the this administration, and specifically the Republican-controlled congress of the last 8 years, should be ashamed of themselves for not fixing the problem. The Democratic party has (once again) the opportunity to show they truly are a populist party by revoking, or at least substantially altering, this outrageous tax increase on the middle class - will they be up to the challenge???
Unfortunately, they never indexed the AMT to inflation so the amount of income that a "high income household" must earn before getting hit by this 26% flat tax keeps getting lower and lower every year. The government estimates that by 2010 over 30 MILLION taxpayers will get hit by the AMT. And let's call this what it really is - a HUGE tax increase. Go ahead and look at what you paid this year and I'll almost guarantee that you are nowhere near 26%.
The AMT just affected someone I know. He makes good money but I certainly wouldn't call him wealthy or rich by any means. He has 5 kids and a good sized house to go w/ that. Because of these deductions and his moderately high income he was hit by the AMT. The increase in his tax bill was over $5k - obviously he wasn't prepared for this. This guy isn't rich - he has to put 5 kids through college. He doesn't have any stock options or any such perks. He's just a working Joe trying to making a (upper) middle class living.
Is this really the type of person we want to raise taxes on? The middle class is supposed to be the backbone of this country and now we're going to bleed them dry through a dramatic tax increase?
The REAL reason this hasn't been changed is because it would affect ALL the budget numbers. All the budget (including the ones making the President's tax cuts permanent) analyses assume the AMT will continue as planned. If this is removed then there will be a fiscal shortfall (worse than there is now) and there will be pressure to rescind some of the current tax cuts and/or control spending.
Due to inflation, this issue gets more and more attention every year and the this administration, and specifically the Republican-controlled congress of the last 8 years, should be ashamed of themselves for not fixing the problem. The Democratic party has (once again) the opportunity to show they truly are a populist party by revoking, or at least substantially altering, this outrageous tax increase on the middle class - will they be up to the challenge???
posted by Jeff Pruitt at 3:43 PM
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