Senators propose repeal of tax trap for middle class
Time to fix the AMT (Alternative Minimum Tax)
from 
JoeUser Forums
JoeUser Forums
From The Washington Times, headline is linked.
Senators propose repeal of tax trap for middle class
ASSOCIATED PRESS
It was intended to catch wealthy tax dodgers, but instead has crept closer to the middle class over the years. So a bipartisan group of senators wants to eliminate the alternative minimum tax even though it would deprive the government of billions of dollars in revenue.
Four senators -- two Republicans and two Democrats, including leaders of the Senate Finance Committee -- plan to introduce a $611 billion bill this week that would repeal the tax. The committee scheduled a hearing for today to examine the uncontrolled expansion of the tax.
"It's become mainstream," said the committee's chairman, Sen. Charles E. Grassley, who said he paid an extra $75 this year because of the alternative minimum tax (AMT).
"If we do nothing, the situation will get worse. It's a mess, and we need to clean it up for good," said Mr. Grassley, Iowa Republican.
Joining Mr. Grassley in the repeal effort are Sen. Jon Kyl, Arizona Republican, and Democratic Sens. Max Baucus of Montana and Ron Wyden of Oregon. Mr. Baucus is the top Democrat on the Senate Finance Committee.
They object to the tax's growing reach and the burden it puts on unsuspecting taxpayers: higher tax rates and fewer tax breaks. Those affected must calculate their taxes twice, under the regular tax system and then the alternative system, and pay the higher amount.
"The time and the bureaucratic water torture that this tax puts people through just seems to me to cry out for reform," Mr. Wyden said.
Congress created the tax in 1969 after discovering that 155 wealthy filers had not paid taxes. At the time, lawmakers estimated the tax would affect one in 500,000 taxpayers.
As a result of inflation, an increasing number of taxpayers are covered by the tax.
The Congressional Budget Office (CBO) last year predicted that the tax could hit as many as one in five taxpayers in 2010, including virtually all married couples with incomes between $100,000 and $500,000.
The CBO also said the tax no longer fulfills its original mission to ensure that the wealthiest pay some tax.
In 2001, about 1,100 taxpayers with incomes greater than $500,000 became trapped in the AMT system, but almost 900 others avoided paying federal taxes. Other taxpayers with incomes higher than $500,000 that year were not affected by the AMT rules.
The several million taxpayers expected to get caught by the tax this year typically will not be wealthy people trying to evade paying their fair share of taxes. Instead, they more often have large families or live in high-tax states or take large deductions for unreimbursed work expenses.
.... more at linked article
Nice to see that this effort is currently a bi-partisan one. It'll be interesting to see if the same co-operation exists once the Senate does as expected and "goes nuclear". Will the Democrats sit on their hands on this issue at that point, and then be unable to explain to their constituents why they couldn't help protect them from this unfair tax?
Keep an eye out on this one though folks, as the AMT is hitting more and more people who were never intended to be affected by it.
Senators propose repeal of tax trap for middle class
ASSOCIATED PRESS
It was intended to catch wealthy tax dodgers, but instead has crept closer to the middle class over the years. So a bipartisan group of senators wants to eliminate the alternative minimum tax even though it would deprive the government of billions of dollars in revenue.
Four senators -- two Republicans and two Democrats, including leaders of the Senate Finance Committee -- plan to introduce a $611 billion bill this week that would repeal the tax. The committee scheduled a hearing for today to examine the uncontrolled expansion of the tax.
"It's become mainstream," said the committee's chairman, Sen. Charles E. Grassley, who said he paid an extra $75 this year because of the alternative minimum tax (AMT).
"If we do nothing, the situation will get worse. It's a mess, and we need to clean it up for good," said Mr. Grassley, Iowa Republican.
Joining Mr. Grassley in the repeal effort are Sen. Jon Kyl, Arizona Republican, and Democratic Sens. Max Baucus of Montana and Ron Wyden of Oregon. Mr. Baucus is the top Democrat on the Senate Finance Committee.
They object to the tax's growing reach and the burden it puts on unsuspecting taxpayers: higher tax rates and fewer tax breaks. Those affected must calculate their taxes twice, under the regular tax system and then the alternative system, and pay the higher amount.
"The time and the bureaucratic water torture that this tax puts people through just seems to me to cry out for reform," Mr. Wyden said.
Congress created the tax in 1969 after discovering that 155 wealthy filers had not paid taxes. At the time, lawmakers estimated the tax would affect one in 500,000 taxpayers.
As a result of inflation, an increasing number of taxpayers are covered by the tax.
The Congressional Budget Office (CBO) last year predicted that the tax could hit as many as one in five taxpayers in 2010, including virtually all married couples with incomes between $100,000 and $500,000.
The CBO also said the tax no longer fulfills its original mission to ensure that the wealthiest pay some tax.
In 2001, about 1,100 taxpayers with incomes greater than $500,000 became trapped in the AMT system, but almost 900 others avoided paying federal taxes. Other taxpayers with incomes higher than $500,000 that year were not affected by the AMT rules.
The several million taxpayers expected to get caught by the tax this year typically will not be wealthy people trying to evade paying their fair share of taxes. Instead, they more often have large families or live in high-tax states or take large deductions for unreimbursed work expenses.
.... more at linked article
Nice to see that this effort is currently a bi-partisan one. It'll be interesting to see if the same co-operation exists once the Senate does as expected and "goes nuclear". Will the Democrats sit on their hands on this issue at that point, and then be unable to explain to their constituents why they couldn't help protect them from this unfair tax?
Keep an eye out on this one though folks, as the AMT is hitting more and more people who were never intended to be affected by it.