Tax Law
AMT Nightmare May Await Many
Posted Nov 7, 2007 1:40 PM CST
By Martha Neil
For the first time in more than five years, it appears unlikely that Congress will enact a so-called temporary patch to prevent the alternative minimum tax from hitting unwary middle-class wage-earners with an unexpectedly high tax bill for 2008.
The likely result, at minimum, is delayed tax refunds for many, even if Congress does put the patch in place next year, reports a McClatchy Newspapers article.
Another news agency doesn't take as gloomy a view of the prospects for enacting the AMT repair legislation. However, it does agree about the major tax problems that the lack of an AMT patch could create even it if is adopted later: Unless the legislation is enacted within a week or so, the delay would disrupt the 2008 tax filing season, holding up refunds for as many as 50 million taxpayers, reports Bloomberg, relying on information from U.S. Treasury Secretary Henry Paulson.
As the news agency explains: "The minimum tax was created in 1969 as a backstop to the regular tax system after lawmakers learned that hundreds of millionaires were avoiding paying any tax by claiming excessive deductions and exemptions. The tax was never indexed for inflation and now hits households with incomes between $200,000 and $500,000 and can affect families with incomes as low as $50,000."
Because the AMT no longer serves its original purpose, the ABA recommends that it be repealed or modified, notes an ABA Journal article on legislative issues.
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Comments
Brian
Nov 9, 2007 6:54 AM CST
Here here. I whole heartedly second the ABAs’ recommendation to repeal AMT. The prolonged existence of the malfunctioning AMT has only allowed more pork to be infused into the budget at the taxpayer’s expense. Stop the excessive taxing, stop the excessive spending. The problem with the “new” congress’ poorly implemented pay-go plan is that it relies upon gross tax hikes and monies that it should not have had in the first place, like the AMT - to fund its pork-spending. The AMT was originally designed and implemented to curb what was at the time viewed as abusive behavior by the ultra-wealthy, not - I repeat NOT - as a revenue raiser for piggish egomaniac congressional spenders. Indeed if this entrenched congressional abuse of the AMT is allowed to go on much longer, there will be no stopping it, ever and we all might as well move to Canada! At least they have their act together (somewhat).
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CJ
Nov 9, 2007 7:21 AM CST
Thank you Brian.
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JSB
Nov 9, 2007 9:56 AM CST
It’s about getting the “finder” to turn in the bags of stolen money he or she found. Little motivation and a lot of natural reluctance. This has been dragging on for years, with a clear recognition of the wrong being done and what is needed to change it, but Congress isn’t anxious to shut down a cash cow. Besides, by not fixing the problem by repeal, your Congressmen (i.e., when they vote for the temporary patch) can get credit year after year for doing something positive for their constituencies. If the problem was fixed permanently, people would forget about it and, prospectively, the Congressmen would be without the “found money” or the political capital they get from voting for the patch.
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CRM
Nov 10, 2007 1:46 PM CST
Brian, you fail to recall that the “old” Congress used the revenue projections of the AMT when adopting the budget as well. It’s not an R v. D issue, as you make it appear to be. Rather, it’s an American problem that needs to be fixed once and for all.
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cornelius david helfrich
Nov 12, 2007 4:37 PM CST
This is a perfect example of why the entire tax code ought to be repealed and replaced with a flat tax. Maybe then normal people of average intelligence could understand the tax law: I made $100.00; here is your $19.50. Then a spending increase would be recognised for what it is: a tax increase.
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