John Kerry: The Real Record on Tax Cuts

[_dynamicdems]

John Kerry, the Energizer Senator strikes again!

Yesterday, he fought for pro-environmental candidates and had a bill passed in the Senate to aid border secutity. Today, he's lambasting Bush's tax cuts.

The Real Record on Tax Cuts



Today President Bush signed H.R. 4297, the Tax Increase Prevention and Reconciliation Act of 2005, into law – a tax package that will cost $70 billion over the next five years. This law does nothing to address the Alternative Minimum Tax (AMT) crisis beyond 2006. The non-partisan Joint Committee on Taxation has stated that 23 million taxpayers will be impacted by the AMT in 2007 if no Congressional action is taken.


The Bush Administration Has Continually Refused to Fix the AMT Tax Hike on Middle Class Families:



· Bush’s much-trumpeted $1.35 trillion tax cut in 2001 missed a golden opportunity to permanently address the AMT and keep middle class families from paying higher taxes. Instead, it exacerbated the number of taxpayers that will be impacted by the AMT. Only 1 percent of the cost of the 2001 tax cut bill was spent on addressing the looming AMT problem.



· The Bush Administration’s Budget for Fiscal Year 2007 included a provision to extend the AMT exemption amount retroactively for 2006 – not for 2007, the year the budget is for. This provision only extended the ATM exemption amount and did not increase it. This would have resulted in an additional 1.2 million taxpayers being impacted by the AMT.



· New data from the Joint Committee on Taxation shows that in 2007, 62 percent of all taxable capital gain income will be recognized by taxpayers liable for the minimum tax. Simply put, taxpayers forced to carry the AMT burden will not benefit from the lower capital gains and dividends rates.



Kerry’s Plan:



This week, John Kerry will introduce legislation that provides relief from the individual AMT for 2007 and repeals the extension of the lower tax rates on capital gains and dividends for 2009 and 2010 that are contained in the new tax package.



Kerry’s legislation will extend and increase the AMT exemption amount for 2007. Without increasing the exemption amount, an additional 3.2 million taxpayers will be impacted by the AMT in 2007. In addition, it will allow nonrefundable credits against the AMT.



The legislation is paid for by repealing the new rates on capital gains and dividends for 2009 and 2010. Shielding middle-class taxpayers from the AMT – a tax that was never intended to impact the middle class – should take precedence over extending tax cuts that are not scheduled to expire for two years.



Background on AMT:



The individual Alternative Minimum Tax (AMT) was designed to ensure that high-income taxpayers paid their share of the federal income tax. Over the years, the AMT has begun to affect middle class taxpayers that it was never meant to impact. It is currently projected to affect numerous middle class families with income below $100,000. The AMT problem has occurred because regular tax is indexed for inflation, but the AMT is not, resulting in a reduction in the difference between regular tax liability and AMT liability. In addition, reductions in the regular income tax have further narrowed the difference between regular and AMT tax liabilities.



To calculate the AMT, individuals add back certain “preference items” to their regular tax liability. These include personal exemptions, the standard deduction, and the itemized deduction for state and local taxes. From this amount, taxpayers subtract the AMT exemption amount, commonly referred to as the “patch.” Prior to 2001, the AMT patch was $45,000 for joint returns and $35,750 for single taxpayers. Without Congressional action, the AMT exemption will revert to $45,000 and $35,750 at the end of 2006.

WTG, Senator Kerry!