Alternative Minimum Tax

Was the major story on CBS Sunday Morning, again predicting that in a few years it will affect many middle class families.

And, again, the "government" cannot afford to cancel or to modify it, as the loss would be enormous (don't have the numbers now)

Well... duh.. modify the AMT so it would affect only the wealthiest incomes - as originally intended - and... gasp - reverse the Bush's tax cut on the same high income.

As it is, for many the AMT cancels out that same "tax cut."

Min tax needs to be played with around the edges so as to remove the home deduction group from its grasp and the atrocious marriage penalties and penalities for people with children who live in high-tax states.

The Graph's huge increase in Alt min folks post 2010 only occurrs if the Bush FIT tax cuts are extended.

but it remains needed.

The fun fact that is avoided in these discussions is why folks are flowing into becoming payers of both the regular FIT and the Alt Min additional tax in such big numbers (albeit not in big extra tax dollar amounts).

The Clinton tax schedules had the regular FIT collecting more, so alt min with its rather low rate rarely collected an additional dime from those not at least in the upper half of the income world (over $40,000 per adult person on return). And even then folks thought it needed a fix to remove most of those folks from the game unless they chose to enter the game by chasing tax shelters.

Now the regular FIT has dropped so much, what was a smaller Alt Min rate is actually the rate at which some "regular" folks are paying tax on the top dollars of their income.

The alt min has not increased - the drop in FIT raytes has exposed some of the areas of the alt min that need to be adjusted.

To remove most folks from its grasp is a major drop in tax shelter chasing - the around the edges changes will stop the major growth in the number paying - but the GOP goal is yet another tax cut for the rich who play with tax shelters.

It is like the Bush tax cuts - regular folks got $300 and said this affects me and is a good - and did not see the trillion being given the rich - so they did not then ask if they wanted that increase in the National Debt birth tax sent on down to their grandkids.

The Alt min pennies that are hitting and will hit the middle class (the alt min tax is defined as the extra money you pay above what is collected under the regular FIT - and it is not much for most folks)will be the cover for another massive tax cut for the rich.

Many of the white collar workers have to pay the AMT quarterly -- this means that the Government get a steady income. Turbo Tax automatically figures the amount and prints the forms.

The GOP are great at "giving" people money -- which is their money anyway -- altering "with-holding" -- but in the end we pay more.

Ray-gun learned these tricks when he was Gov in California. First he raised the taxes a bit too much. Then he gave "tax rebates" which made it look like he was cutting the taxes -- and the dumb asses in California fell for his shell game. He brought the shell game to the national level.

The AMT is merely another shell game where we load the government money and then many people get this huge "refund" check. Which is money the government has been using without paying interest.

(The above version is very simplified -- and my conservative GOP father falls for their BS every single time).

tax can be considered something to reverse and not allow to have an effect in the Alternative calculation - because you are already getting the benefit of a lower, less "progressive" rate - and you know how important it is for the rich to get to a "flate rate" income tax - a flate rate like we have for the first $90,000 of income under the income tax called the "payroll tax".

So things like Exemptions for yourself, your spouse and your dependents and whatever, and the Standard Deduction, and for those that itemize State and Local Taxes, and Interest on Second Mortgages if it was not taken out to improve the home, and the limited Medical Expenses deduction is even more limited, and Miscellaneous Itemized Deductions are no longer deductions - such as unreimbursed employee expenses, tax preparation fees, and many investment expenses, and you do not get many of the "credits" that reduce your tax under FIT, and the rules that say rich man's income is not really income you need to report, such as Incentive Stock Options, are suddenly gone and one reports such income, and "rich man rules" that say wages are to be more taxable than income from investmets (since 90% of the income in the top 10% is investment income) are gone - so while Long-Term Capital Gains still get the rich man's tax forgiveness those gains will reduce the AMT "excemption amount" (as in a deduction that begins to be phased out when your income goes above $112,500), and that Tax-Exempt Interest income may not be FULLY tax exempt from AMT tax, and of course some, but not all, Tax Shelters are curtailed in their ability to reduce the Alt Min income tax - albeit you can still get around most of this via partnership or limited liability company arrangements involving such activities such as oil and gas drilling - but the deduction is less.

As you can see, there is not much to the AMT that affects most folks - given the lower tax rate that is applied to the income defined under the AMT.

But fixes like marriage "penalty", the home interest deduction reduction, and "penalities" for people with children who live in high-tax states need to be fixed.