A Tax Increase That Bush Didn't Mention

[truthpusher]

A Tax Increase That Bush Didn't Mention
----------------------
By EDMUND L. ANDREWS
Published: April 10, 2005
WASHINGTON
----------------------
CYNICS have long predicted that the Bush administration, plagued by budget deficits, will eventually start raising taxes. But now it is becoming clear how it would do so: the alternative minimum tax.



Baffling in its complexity and often bizarre in its impact, the alternative minimum tax is a giant undeclared tax increase that will ensnare tens of millions of moderate-income families in the next several years.

It was created in 1969 to prevent the very rich from using tax deductions to avoid paying a fair share of taxes. But when the deadline for filing income tax returns arrives on Friday, the alternative minimum tax will require 2.9 million families to pay an average of about $6,000 more than what they would owe under traditional calculations

That is just the start. If current law remains unchanged, the alternative minimum tax is expected to wring an extra $33.9 billion from 18 million households in 2006. In 2010, it will rake in an additional $100 billion, and by 2015 an extra $200 billion.

Make no mistake: no one says they want that to happen. But it is one thing to rein in or eliminate the tax itself, and an entirely different matter to give up the money that it would generate.

complete story: http://www.nytimes.com/2005/04/10/business/yourmoney/10view.html?

[bluestateguy]

1. Somehow this will all be blamed on the "liberals"

They're all out of power now, of course, but I'm sure this will be deemed all their fault too.

[Up2Late]

2. I agree the AMT needs to be fixed, but the graph is missing the Key...

...What's the difference between the light gray and the dark gray in the chart?:shrug:

[truthpusher]

3. Keys on the chart....

...were you kidding in some way?

[Up2Late]

11. No, I guess this is just a lousy chart, you'll have to help here...

On the chart, after 2010, the dark gray bar drops to less than 2006 levels; why is that? If the "Tax Cuts" are not extended, would we only have the Dark bars?

And then the dark and the light bars in the graph, is that the expected "regular" tax (dark part) plus the AMT (light part)?

Do you understand my confusion?

I think basically, I might be over thinking this one. Does this chart only show if nothing is fixed with the AMT AND the "tax cuts" are extended?

What would happen if they DO fix the AMT? I think that's what I'm not seeing in this chart.:shrug:

[northzax]

33. the tax cuts expire in 2010

so the revenuuce from the AMT will drop. The dark bar is projected AMT revenue, the light bar is the difference in the ten year window between keeping the gutting alive (light grey) and paying our bills (dark grey)

[w4rma]

4. There are nearly 300 million American citizens. Why should I care

about this tax that affects only 3 million Americans who are also among the most wealthy Americans (if not *the* most wealthy Americans)?

I don't see the "problem" here.

[high density]

6. A number of months ago I saw a CBS News report on this..

Some family was whining that they'd have to pay $200k in income taxes because of the "alternative minimum tax." I figure if they have to pay that much in income taxes then they must be really well off.

I'd love to have the salary that brought my annual income taxes to $200k.

[bunny planet]

8. It's not just snagging people with 200K income tax due. In fact it's not

snagging them at all. It's snagging people in the 100 - 200K gross annual income bracket. My family went from getting an income tax return to owing tax this year, we lost $6000. to the alternative minimum tax and we can not afford it. The point is that the tax is not doing what it was designed to do, tax wealthy individuals by closing loopholes, it is snagging more and more middle class people instead. In fact, I can't wait until my Republican sister-in-law in Nashville, who was crowing about her wonderful $600. tax rebate a couple of years ago, gets a load of her 2004 tax bill. That's about the only thing I'll smile about in relation to this disgusting tax. It does away with the benefits of your home tax deduction too. Just great. When will people get hip to what's being done to them and start complaining?

[trogdor]

12. Well, we're on the bleeding edge at Trogdor's lair.

We excaped the AMT, by my reckoning, by the skin of our teeth. The way I see it, we'll be shovelling mucho pretax cash into our 401K accounts in the years to come to avoid it.

Why should you cry for me? Because I'm not one of those folks who has more money than he can spend. I'm one of those solidly middle-class people who keep the economy going every time I open my checkbook. Believe me, I believe in paying my fair share, but if I'm spending more on taxes, gasoline, etc., I'm spending less in your store.

[mtnester]

7. We have been on the receiving end of AMT the past two years

and we by no means are wealthy. Hubby and I both withhold single zero, plus an additional 15% just to cover this monster. We are married with no child as a deduction, and we have to file separate or we really get killed. Yes, our accountant is competent.

It is not really a great amount that needs to be reached for a dual income household....around $112,000.00 is the current threshhold, I believe.

[RUMMYisFROSTED]

17. 112k?

I was scared for a minute.

[PeaceProgProsp]

31. You should care because there a huge differences between

the wealth of the people at the top of that 2.9% range and people at the bottom of that range, and because there isn't much difference between the people on either side of the bottom of that range. So people who are actually middle class, who are having a tough time making ends meet are slipping into the AMT trap.

Another problem is that there's no corporate tax equivalent.

[indepat]

5. But increases in payroll and income taxes on the middle class don't

count as tax increases in the Repukes eye: remember when Greenspan fashioned a much higher payroll tax rate on a much higher middle income during the early Gipper years, neither were those tax increases in the Repukes eyes.

[deacon2]

9. Many here seem to miss the point of this post

This is not about taxing "rich" people. This is about a tax which is slowly sliding downward into the middle class and failing to do what it was enacted to do. In some cases it has hit families of four with avg. incomes as low as $57,000 per annum. That might be rich to you, but often it was triggered by being in "outpriced" real estate markets where the family essentially was house poor and had "too many" deductions versus income. This is going to bite an increasing number of "regular" folks on the butt if it is not revamped or rescinded. The details are complex and arcane, so it may not make a good "plank" for the Dems, but that doesn't change the fundamental unfairness and flaw of this tax.

[LynnTheDem]

13. BINGO. This is TAX THE MIDDLE CLASS

Not "tax the wealthy".

[leQ]

14. do you really think these guys are going to fix this?

c'mon, we're talkin about bushite people now.

[NNN0LHI]

10. I know some Bush voters that have been edgy lately. Real damn edgy

They are right in this wage range too. They don't smile anymore at all. I actually have been avoiding some of them because they appear to be on the verge of losing it. I think I am starting to figure out why that is after reading this article. Thanks for posting this.

Don

[papau]

15. A false "problem" - but one the politics of will be fun to watch. The Alt

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.

[papau]

30. Any thing that reduces your

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.

[DeepModem Mom]

16. kick

[Moderator]

18. kick to combine

[Liberty Belle]

19. Tax Increase That Bush Didn't Mention(Alternative Minimum Tax: watch out!)

A Tax Increase That Bush Didn't Mention

By EDMUND L. ANDREWS

Published: April 10, 2005


WASHINGTON

CYNICS have long predicted that the Bush administration, plagued by budget deficits, will eventually start raising taxes. But now it is becoming clear how it would do so: the alternative minimum tax.

Baffling in its complexity and often bizarre in its impact, the alternative minimum tax is a giant undeclared tax increase that will ensnare tens of millions of moderate-income families in the next several years. It was created in 1969 to prevent the very rich from using tax deductions to avoid paying a fair share of taxes. But when the deadline for filing income tax returns arrives on Friday, the alternative minimum tax will require 2.9 million families to pay an average of about $6,000 more than what they would owe under traditional calculations

That is just the start. If current law remains unchanged, the alternative minimum tax is expected to wring an extra $33.9 billion from 18 million households in 2006. In 2010, it will rake in an additional $100 billion, and by 2015 an extra $200 billion..

http://www.nytimes.com/2005/04/10/business/yourmoney/10view.html?

[Tux]

20. Bye bye America

Hello, Medieval feudalism.

Is it just me or is Bush driving the Republicians off a cliff and singing "Puff the Magic Dragon" as he does it?

[bklyncowgirl]

21. The stealth tax

I dodged the bullet on this one this year but I'm betting closer to it as our income goes up and the level at which alternative minimum tax kicks in remains the same.

I'm a librarian married to a social worker--certainly not the sort of people for whom this tax was intended but clearly, the intention now is to take as much from the hide of the middle class as possible--and they can do this by simply not fixing this travesty. The thing is people simply trickle in and of course there's no outcry because no one is actually trying to raise taxes in Congress.

[NorthSideCubsFan]

24. At what income does one become "rich"??

I don't think you will find many Democrats willing to argue that those making over $100K deserve any sort of tax reduction.

[Igel]

One popular number is$75k.

By that token, we were "rich" last year. (At least this is the number that many newspapers and at least some economists use.)

My mother was complaining about the decline of the middle class, I quoted the number to her, and she realized that she and I were part of it.

Anybody have any history on the Alt Min tax?

On edit: Nevermind. The AMT apparently dates to 1969.

[Igel]

34. self-delete

that double-clicking will do it every time

[dbt]

22. Great report on this subject 4/10 on CBS Sunday Morning.

Didn't find anything of substance on the CBS webshite yet, but the most chilling part of the report by Joie Chen was how Congre$$ is unlikely to do anything about the AMT because of the revenue it would cut off.

[KansDem]

32. Let me see if I understand this...

Cut taxes on the wealthy and make up the difference by letting the middle class pay more through the AMT.

F*ck Bush and his henchmen! :grr:

[xchrom]

23. this is one of those things that can really burn you up.

now i'm one of those ''don't mind paying my taxes'' types -- in fact i want to pay my taxes -- it's how we pay to all live together.

but taxes that take unnecessary bites out of the middle calss who don't need the burden -- fry my ass.

p.s. i have a tax person and always get my fair share of deductions -- but i know others who don't and get burned -- this tax needs to be done away with and more properly targeted.

[soup]

25. The bottom line

for those who aren't registered at the NYT site, here's the last bit of the article:

>>A potential trade-off, but a politically explosive one, would be to eliminate deductions for state and local taxes, which cost the Treasury about $40 billion a year and are a big reason that many people become subject to the alternative tax. But getting rid of those deductions would cause howls of protest in Democratic-leaning states like New York and California, which tend to have above-average tax burdens.

Thus far, the issues have been so tangled and vexing that both the White House and Congress have simply opted to block increases in the alternative minimum tax with one-year and two-year patches.

But that will become expensive. By about 2008, Mr. Burman estimates, the alternative minimum tax will generate so much money that it would be cheaper to abolish the regular income tax. <<

note: Mr. Burman is with the Urban Institute.
http://www.urban.org/
http://www.taxpolicycenter.org/home/

[papau]

26. A false "problem" - but one the politics of will be fun to watch. The Alt

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 the Alt Min 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 rates 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 - while the around the edges changes will stop the major growth in the number paying. 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.

[soup]

28. Thanks for your post.

I don't understand most of this. I guess partly because of a lack of need to since we're fairly low income, and partly because it's so convoluted, ever-changing and confusing.

But it did catch my curiosity, so I'm reading more here:

Alternative Minimum Tax 101
A brief overview of the alternative minimum tax (AMT).
http://www.fairmark.com/amt/amt101.htm

Top Ten Things that Cause AMT Liability
An overview of some of the things that may cause you to pay alternative minimum tax (AMT).
http://www.fairmark.com/amt/topten.htm

Although I'd hate to compare myself with ** in any way, my lack of knowledge on the subject brings to mind his quote from some time back when presented with the budget. He said something along the lines of, "Yep, looks like a budget, there's lots of numbers."

[papau]

29. :-) - many numbers! Quick fact is that anything that reduces your

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.

[Festivito]

27. The deficit is a tax increase NO ONE MENTIONS.

After the 1%, 2%, or 3% tax cut, the yearly deficit is AT LEAST a 25% tax increase, not including consideration of the interest to be paid on that borrowing.

People do not understand how those Christian RepubiCONs could be stealing money when they give a tax cut. They think there is less to steal.

THERY'RE BORROWING IT!!!