The Alternative Minimum Tax: Be Afraid, VERY Afraid.
Taken from Dallas Federal Reserve
Taken from Tax Foundation.org
This isn't the first time this subject has adorned this blog, and surely it's worth more than one turn in the barrel, especially after this morning's read of the NY Times brought to me Edmund L. Andrews piece, Hmmm. What's This Alternative Tax? Hey, Wait! Ouch! To get a general idea of where this is going, just take the lead sentence to the article:
DO House Republicans harbor some sort of deep rage against moderately affluent families with lots of children?
Mind you, the Alternative Minimum Tax (AMT) has been around for some time, but Andrews is referring here to changes to the tax law that overwhelmingly favor the rich and essentially stick it to the non-rich, which in this case includes not only the poor but those who on the whole are doing alright for themselves without being necessarily "rich". The current tax bill extends Bush's tax cuts for dividend income and capital gains, but does nothing to change the AMT, which is beginning to reach into the pockets of the not so rich, something it was NEVER intended to do.
The AMT's origins, as with many things, though hardly all, that come out of our legislators started with good intentions. So what's the AMT? Here again I fall back on Andrews:
The A.M.T. was created in 1969 to stop the very richest taxpayers from using tax breaks to avoid all or most of their income taxes. But it is set to engulf millions of families with fairly modest incomes, for two reasons: it isn't indexed to inflation and it has a perverse interaction with President Bush's tax cuts of 2001 and 2003. They lowered normal income taxes but not the alternative minimum tax. If the A.M.T. turns out to be higher than the ordinary income tax, a person has to pay the higher amount.
So in short, whatever the rich may have had to pay in tax under an AMT construct are balanced by sustaining the reduction in capital gains and dividend income taxes, which the rich benefit from FAR more than the average Jane and Joe do, and FAR, FAR more than the average poor person does. Jane and Joe, on the other hand, with increasing income over the 30 years since the AMT was put into effect, now find themselves within the reaches of this law and thereby find a real chance of their looking at a nice tax bill for simply being middle class. Unlike with the rich it's reasonable to expect that there'll be no where near an offset for that tax bill in whatever capital gain or dividend income the "not rich" may normally make in the course of their tax year.
It's not as if the politicians are not aware of the problem with AMT, but on the whole sucking up to Bush is more important to the Republicans than doing something about all the people in this country, in particular those who've managed to work their way into a middle class status (whatever the heck that means, exactly, and the article points out that the AMT can stretch down to people making as little as $58,000, so this could mean YOU), that they're likely to hurt financially. Indeed, the politicos in DC have been passing temporary fixes on a yearly basis for a number of years now, skirting a need to address the real problem and at the same time managing to make Bush and the neo-cons like Grover Norquest (who thinks this is a great country, especially for guys like him, and no one should have to pay taxes for the privilege of living in it - gotta love 'em) happy. The problem is that the overall revenue generated by taxes has been thrown out of whack by Bush's tax cuts and a need for some sort of income stream still exists, so we've reached a point where temp fixes of the AMT are becoming too expensive, making it that much harder to do something about the AMT without making somebody, especially rich somebodies and their patron president St. George the Clueless (cheap shot admittedly, but this guy really does get to me) unhappy .
Given that it's the middle class that largely have the luxury of blogging and the time to peruse blogs, you, dear reader, are a likely victim of a tax that was put in place some 35 years ago for rich people. Now if ever you needed to get in touch with your political representatives in congress to let them know that you're not happy about this, NOW is that time. So if you've not
been particularly politically active up to now please take the time to find your house and senate representative at the following web sites:
The Senate: U.S. Senate
and let them know that you'd appreciate not getting a higher tax bill for this year for a tax that was never intended for you to begin with, and then ask them what they're doing about making sure that this isn't going to happen to you.