Bush wants $450 B to cut the Alt Min Tax - but he won't mention until

[papau]

after the election. Since the regular tax rates have been cut to the bone for the folks over 100,000, we must cut the Alt Min Tax - right!???!

From: http://www.brookings.edu/views/op-ed/gale/20040121amt.htm

The individual alternative minimum tax (AMT) operates parallel to the regular income tax, with different rates and definitions of income and deductions. The AMT grew out of a minimum tax that was first enacted in 1970 after it was revealed that some high-income households had paid no income taxes in prior years. Although it has historically applied to few taxpayers, the tax is projected to grow rapidly over the next decade under current law. In addition to increased complexity, this will create problems for the transparency, equity, and efficiency of the tax code.

The expansion (in the number of folk affected - meaning filing under AMT and not Regular FIT rules) occurs because the AMT is not indexed for inflation and because of the 2001 tax cut. Because it is not adjusted for inflation, AMT liability tends to increase every year, even if real income does not change. At the same time, the tax cut reduces regular income tax liabilities without providing permanent AMT relief.

But the main point is that Bush has not mentioned AMT cost as he tries to sell "Making the tax cuts permanent" - but then he does not mention the structural nature of the deficit he has created, or how the ONLY FIX - albeit TEMP - is to cut SS benefits and use more of the Social Security money to run the Defense Dept - would reduce revenue by $330 billion in 2014 if the AMT is not fixed -- or how the second 10 years, and then the 3rd 10 years, etc. are murder on the financial well being of our kids.

While the AMT reduces the number of high-income filers who pay no income tax (In 2001, an estimated 100 tax filers with income over $1 million avoided all income tax, but at least 700 would have if not for the AMT), this goal is better accomplished by removing the Bush gifts to the rich in the regular income tax, most importantly the preferential treatment for capital gains—the lynchpin of most individual tax shelters— which is not curtailed by the AMT.

Reforms like indexing the AMT for inflation, allowing deductions for dependent exemptions, and allowing personal credits against the AMT would reduce the number of AMT taxpayers in 2010 by 88 percent, including over 98 percent of those with incomes under $100,000, but would cost - a reduction in 2005-14 revenues by $450 billion if the tax cuts sunset, $780 billion if they are extended.

http://www.brookings.edu/views/op-ed/gale/20040121amt.htm

[RobertSeattle]

1. Why congress didn't index the AMT to inflation blows my mind

Classic example where both the GOP and the DEMs screwed up royally. (But it has been a sneaky way to have a "stealth" increase in taxes on some people)

[papau]

2. but it is the wrong people - not tax shelter types or cap gain types

paying a few dollars more, but middle class child deduction removal, and items that should have been indexed catching lower and lower (relative) income folks each year.