This is cool: Democrats are going to fix the Alternative Minimum Tax...

[originalpckelly]

also known as the blue-state tax because it usually applies to people in none other than blue states.

Since the AMT doesn't take into account inflation, people who were once middle class, based on a adjusted for inflation dollar scale, are now being taxed like the rich people they aren't. Congress needs to either peg the starting point of the tax to inflation, or they need to do away with it.

One way or another, people are being slayed by this awful tax.

http://en.wikipedia.org/wiki/Alternative_minimum_tax

Here is the story about this:
http://www.washingtonpost.com/wp-dyn/content/article/2006/11/10/AR2006111001800.html

[phiddle]

1. And they have legislation which would be a far-reaching reform.

The "Fair Flat Tax" introduced by Sen Ron Wyden and Rep Rahm (the in some ways justly reviled) Emmanuel in Dec 2005 would treat all income equally (no preferential treatment for investment or dividend income), collapse tax brackets to 3, repeal the AMT and provide a hefty increase in the standard deduction to $15,000.

http://wyden.senate.gov/

[1932]

2. Clinton was right to expand brackets from 3 to 5.

That must have been the bone wyden and emanuel threw to Republicans to get this bill out of the committee. I hope they don't include it in the next version.

[papau]

3. Sen Ron Wyden and Rep Rahm "Fair flat tax" idea of trading full taxation of investment income

for the AMT makes logical sense.

I hope something like that is adopted.

But I suspect they will simply adjust the deductions in the AMT to remove the middle class - the under 150,000 folks - from being hit by the tax.

[phiddle]

4. Please read the text of the legislation, at the link.

It specifically REPEALS the AMT.

[papau]

6. :-) understood - and my post says trading the AMT for applying the tax rate against earnings that

include investment come at 100 cents to a $ - the same as we now do wages - in the calculation of the tax owed under our two income taxes - the FIT and the SS payroll tax - is a great idea. Or at least that is what I meant.

But I suspect my idea - and theirs - will not be passed

And I suspect that instead the rich will have Congress do what will least hurt the pocket book of the rich - and not touch the advantaged position of investment income from inherited wealth.

which is why I expect an expansion of the standard deduction and other deductions so that the AMT does not hit the middle class - a solution whose cost will be born less by the rich.

Sorry that my post could be read that I was suggesting that only in the AMT would the tax rate be applied at 100 cents on the dollar for investment income - althought that is yet another possible compromise for paying for raising the start of the AMT to incomes above $150,000 by increasing the AMT standard deduction or by exclusion of the first 150,000 from the calculation.

From the point of view of we on the left, the important change would be to treat wage income the same as investment income (which is usually from inherited wealth)in all income tax payments - including the Social Security payroll tax. Today we favor the wealthy persons main source of income and tax it less or not at all, compared to our withheld tax from the paycheck system for wages and a tax calculation that results in a lower tax rate for investment income than the tax rate applied to wages.

[phiddle]

8. We seem to agree

that to tax-favor income derived from capital over income derived from wages is the ESSENCE of class war, and also that a drastic increase in the standard deduction (as in the Wyden-Emmanuel approach) is desirable. And I share your suspicion (paraphrasing) that the truly wealthy will find a way to hijack the process to their benefit. NB: financial wealth is not exclusively inherited, but is often accumulated by becoming a member of the executive class---Dick Cheney for example.

One thing which you mention that the Wyden-Emmanuel approach does not address is the greater cost of the FICA taxes which is born by the lower 80%. Currently it is (I believe) 15.4% on the first $96,000 of income, the practical effect being that Bill Gates pays the same FICA as a married, 2 income couple earning $96,000. Wyden and Emmanuel compensate somewhat for this by having 3 tax rates: 15% from $1-25,000, 25% from $25,000-$120,000, and 35% thereafter. (In this sense, "Fair Flat Tax" is a misnomer---it's 3-tiered.) It seems simpler, and more defensible, to have 2 tax rates, say 20% on income below $96,000 and 35.4% (20% + 15.4% compensation for FICA not paid) thereafter. If the standard deduction is large enough and the most popular deductions (home mortgage, educational and health care expenses) are retained, the overall tax curve would be very progressive below $100,000 of income.

This issue notwithstanding, the Wyden-Emmanuel approach seems to me a big step toward fairness.

[papau]

10. I agree - and getting the wage cap removed along with counting investment income

for both the purpose of taxation and for the purpose of benefit calculation is the second Tax change that is needed.

The GOP will scream how stupid it is to send million dollar monthly checks to the rich - which the corporate owned media will try to use to hurt the Dems - but we can smile knowing the 100's of millions in taxes that that rich pension paid for his multi-million dollar annuity was large enough to give the system a surplus - a surplus that will allow a TAX CUT IN THE PAYROLL TAX RATE. AND THE MEDIA WILL HAVE TO REPORT THE CHANGE AS A TAX CUT!

THIS IS THE TAX CUT THE MIDDLE CLASS NEEDS - WHICH THE DEMS SHOULD PASS THIS NEXT SESSION.

[rucky]

5. Let's see Bush veto a tax cut!

:lol:

[papau]

7. He will veto - claiming the offset used to pay for the tax cut is anti-growth

Any off set that pays for the elimination of the AMT will increase taxes on the rich or decrease welfare for the rich and the companies of the rich - and for the GOP that is "anti-growth"

We can expose the GOP once again as the part of the rich in the class warfare of the rich against the middle-class -

but we can't stop the Bush veto -

and we can't stop the GOP controlled media from spinning the Bush veto as Bush stopping those anti-growth Democrats.

[phiddle]

9. Let him veto it---

we can send out a 1-page alternative 1040 in 2008 to all voters, inviting them to do their taxes the Democratic way. If we did this, we'd OWN the tax issue.

[bobbolink]

11. I wish people were as upset by regresssive taxes which hurt POOR PEOPLE most!

Continually adding more sales tax when a program is instituted keeps hurting poor folk more and more.

I can't understand why "liberals" accept it, and even vote for it!

Enough with all this regressive taxation--back to the previous levels of income tax!!

[blurp]

12. Let's not be hypocrites.

We can't cut taxes just because they happen to fall on people in blue states.

If that were the case, we'd cut the income tax, since it too impacts more people in blue states than in red states.

[mhatrw]

13. It's either fix it or scrap it.

I say fix it.