← Autodidact Archive · Original Dissent · Walter Yannis
Thread ID: 17703 | Posts: 6 | Started: 2005-04-10
2005-04-10 13:20 | User Profile
[URL=http://www.nytimes.com/2005/04/10/business/yourmoney/10view.html?th&emc=th]New York Times[/URL]
A Tax Increase That Bush Didn't Mention
By EDMUND L. ANDREWS
Published: April 10, 2005
(April 10, 2005)
WASHINGTON
CYNICS have long predicted that the Bush administration, plagued by budget deficits, will eventually start raising taxes. But now it is becoming clear how it would do so: the alternative minimum tax.
Baffling in its complexity and often bizarre in its impact, the alternative minimum tax is a giant undeclared tax increase that will ensnare tens of millions of moderate-income families in the next several years.
It was created in 1969 to prevent the very rich from using tax deductions to avoid paying a fair share of taxes. But when the deadline for filing income tax returns arrives on Friday, the alternative minimum tax will require 2.9 million families to pay an average of about $6,000 more than what they would owe under traditional calculations
That is just the start. If current law remains unchanged, the alternative minimum tax is expected to wring an extra $33.9 billion from 18 million households in 2006. In 2010, it will rake in an additional $100 billion, and by 2015 an extra $200 billion.
Make no mistake: no one says they want that to happen. But it is one thing to rein in or eliminate the tax itself, and an entirely different matter to give up the money that it would generate.
President Bush has promised to fix the alternative minimum tax as part a fundamental overhaul of the tax code, and he has ordered a bipartisan advisory panel to come up with recommendations by the end of July.
But in giving the panel its marching orders, White House officials made it clear that they are counting on the extra money regardless of what happens to the alternative tax. Under the president's instructions, the panel's recommendations on addressing the alternative minimum tax are supposed to be "revenue neutral," neither raising nor lowering taxes, and to assume that his income-tax cuts will be made permanent rather than expire in 2010, as required under current law.
Making those ordinary income-tax cuts permanent would reduce the amount of available revenue by about $1.8 trillion over 10 years. But White House officials told the panel that any change to reduce or eliminate the alternative minimum tax would have to be offset by higher taxes someplace else.
"My understanding is that any reform in the A.M.T. that loses money would have to be made up with offsetting revenue," said Elizabeth Garrett, a panel member and a professor of law at the University of Southern California.
Jeffrey F. Kupfer, executive director of the tax panel and a former Treasury official, confirmed that interpretation. "Our mandate is to be revenue-neutral, and we are interpreting that with respect to the president's policy baseline, which does not include a permanent fix to the A.M.T.," he said in an interview last week.
Tax experts have long complained that the alternative minimum tax is a "stealth tax increase," one that Congress never intended and that is likely to catch millions of taxpayers by surprise. But a tax increase through tax reform could be even stealthier. If the alternative tax is reduced, the offsetting revenue increases are likely to be buried in so many other changes that most people would never know what hit them.
Seen or unseen, the looming tax increases are almost as large as the president's tax cuts. Leonard E. Burman, a senior fellow at the Urban Institute, estimated that the government would have to raise ordinary income tax rates substantially in every bracket to offset the money lost in each bracket by the elimination of the alternative minimum tax. People in today's 28 percent bracket, for example, would have to pay a top rate of 35 percent. Those who now pay a top rate of 33 percent would pay 41.4 percent.
"The A.M.T. is a huge tax increase built into current law," Mr. Burman said. "What the current law assumes is that over time we move to a tax that is much less progressive, that has atrocious marriage penalties and penalizes people with children who live in high-tax states."
Taylor Griffin, a spokesman for the Treasury Department, said the administration's goal was to prevent a hidden tax increase by replacing the alternative tax with something that was easier to understand and more predictable. "What we are trying to do is prevent a stealth tax that sneaks up on you," he said. "If we don't do something, millions of Americans will be facing unanticipated tax increases."
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The alternative minimum tax is similar in some ways to a flat tax that blocks people from using most of the big deductions that reduce their taxable income under the normal rules. A married couple with a gross income of $100,000, for example, must first calculate its tax bill the traditional way, then again under the A.M.T. In the alternative calculation, the couple gets to exclude $58,000 from taxation, but it must also strip out all the personal exemptions and most itemized deductions.
The prohibited deductions include those for state and local taxes, medical expenses, employee business expenses and interest on home-equity loans. The A.M.T. would then apply a flat tax of 26 percent (28 percent for couples who earn more than $175,000). The couple must pay whichever is higher, the tax calculated under the traditional method or the one under the A.M.T.
The huge looming tax increase is caused by two things. The first is that the exclusion level for the alternative minimum tax is not adjusted for inflation, so the tax affects more people each year as nominal incomes go up. The second, paradoxically, stems from Mr. Bush's tax cuts of 2001 and 2003.
Those cuts reduced regular tax rates at all income levels but did not change the alternative minimum tax. At the same time, some of the cuts came in the form of expanded deductions - the child tax credit, child care tax credits and bigger exemptions for married couples - that are not allowed under the alternative formula.
The effect of making Mr. Bush's ordinary income tax cuts permanent would be significant. Mr. Burman, at the Urban Institute, estimated that the alternative minimum tax would generate about $69.2 billion in extra tax revenue in 2015 if the president's income tax cuts expired on schedule. But if the White House persuaded Congress to make the cuts permanent, the alternative minimum tax would raise a staggering $200.8 billion in that one year.
If the A.M.T. itself is pared back, how would that tax increase show up in practice? The possibilities are almost limitless, from higher tax rates for everybody to the abolition of popular tax deductions.
Administration officials are almost certain to insist that any tax reform result in lower tax rates and fewer deductions. Many Republicans long for a flat tax or a national sales tax, but that would mean abolishing or reducing sacred cows like the tax deduction for mortgage interest.
A potential trade-off, but a politically explosive one, would be to eliminate deductions for state and local taxes, which cost the Treasury about $40 billion a year and are a big reason that many people become subject to the alternative tax. But getting rid of those deductions would cause howls of protest in Democratic-leaning states like New York and California, which tend to have above-average tax burdens.
Thus far, the issues have been so tangled and vexing that both the White House and Congress have simply opted to block increases in the alternative minimum tax with one-year and two-year patches.
But that will become expensive. By about 2008, Mr. Burman estimates, the alternative minimum tax will generate so much money that it would be cheaper to abolish the regular income tax.
2005-04-10 19:16 | User Profile
There is no "Tax increase that Bush didn't mention" (at least in regards to the AMT).
The AMT is just a spotty effort to prevent people with strong incomes to avoid taxes by excessive deductions and exemptions. If tax cuts cause more people to be affected by the AMT, it just means less of a tax cut, not a tax increase.
It's ironic that the people who tend to be flat tax proponents most loudly object to the AMT flat tax. It makes me question their motives. They want to lower the upper tax brackets without closing down tax loopholes.
2005-04-10 19:21 | User Profile
Gee, looks like that $300 tax break most of us got from Dumbya shorty after he assumed office really is going to come back and bite us in the collective ass, eh? Wonder what form the next tax "trick" levied upon the shoulders of the American public will take when King George II obediently goes after the next target on Israel's hit list...
2005-04-10 21:26 | User Profile
[QUOTE=Happy Hacker]The AMT is just a spotty effort to prevent people with strong incomes to avoid taxes by excessive deductions and exemptions. If tax cuts cause more people to be affected by the AMT, it just means less of a tax cut, not a tax increase..[/QUOTE]
That's just not right. We're not talking about "loopholes" here - we're talking about stuff like deductions for state taxes paid and even PERSONAL EXEMPTIONS. Sheesh.
I've been nailed by the AMT the past few years and I think it SUCKS.
Basically, the AMT says that if you make over a certain amount of money, then you don't get to take the deductions that everybody else gets to take. You get taxed more on GROSS income than on NET income. That's not even an income tax - it's a horribly repressive tax on turnover.
That's nuts, in my opinion. If I pay state taxes, for example, why shouldn't I get to deduct them like everybody else? Heck, the AMT taxpayer likely paid more state taxes than others in the first place, but then no deduction because - why? Because I showed too much personal initiative and I need to pay for Sally Soccermom's hysterectomy?
And why should I lose my personal exemptions, for Pete's sake? Those are designed to make the tax on "net" income - clear of basic living expenses but in an administratively manageable way. Don't I have living expenses that should be netted out? Guess not.
I note that my low achieving high school chums who never read a book or did much of anything except drink beer and play darts in some Wisconsin tavern get to keep their personal exemptions.
And I'm not even talking about the real dregs of our society that congregate in ghettos and barrios.
It's the regime punishing hard working white guys like me and to reward the less ambitious, of whatever race and sex. I worked my ass off for 25 years to get ahead while my high school chums chose an easier, softer way - why should I lose the tax attributes that are available to them and everybody else? Why should I have to pay what amounts to a tax on gross income rather than net income?
And I'm not even a top earner. I've just had my tail feathers singed the past few years by the AMT, I didn't make enough to really get hammered. We've seen major bracket creep with the AMT the past few years as this article points out. The big kick in the pants for the next decade or so as tax bracket creep moves steadily down the economic ranks. Inflation will ensure that more and more families wind up paying what amounts to a really egregious tax on gross income for the benefit of the riff raff.
F**king parasitical tax system supporting a bunch of loser beer swilling, meth snorting morons.
I hate it.
2005-04-11 00:10 | User Profile
[QUOTE=Walter Yannis]That's just not right. We're not talking about "loopholes" here - we're talking about stuff like deductions for state taxes paid and even PERSONAL EXEMPTIONS. Sheesh.
A married couple gets a $49,000 exemption under AMT and only $6,200 under regular taxes. Not being able to deduct state taxes might result in an effective tax rate increase of 1 or 2%, but the AMT tax rate is several percentage points lower than regular taxes (top AMT rate is 28%, top regular tax rate is 35%), for most anyone affectecd by AMT. So, I don't see a big loss with different rules for deducting state taxes and personal exemptions.
I've been nailed by the AMT the past few years and I think it SUCKS.
All taxes suck, especially those paid to the feds. Did you not get most of your AMT difference paid back to you via the AMT credit?
Because I showed too much personal initiative and I need to pay for Sally Soccermom's hysterectomy?
So, you're the one to blame for helping the government fund all these antiwhite programs. :1eye:
2005-04-11 06:20 | User Profile
[QUOTE][Happy Hacker]A married couple gets a $49,000 exemption under AMT and only $6,200 under regular taxes. Not being able to deduct state taxes might result in an effective tax rate increase of 1 or 2%, but the AMT tax rate is several percentage points lower than regular taxes (top AMT rate is 28%, top regular tax rate is 35%), for most anyone affectecd by AMT. So, I don't see a big loss with different rules for deducting state taxes and personal exemptions.[/QUOTE] Yeah, but you lose all these other tax attributes. It resulted in my paying about $3k in additional taxes last year.
[QUOTE]All taxes suck, especially those paid to the feds. Did you not get most of your AMT difference paid back to you via the AMT credit?[/QUOTE]
No.
[QUOTE]So, you're the one to blame for helping the government fund all these antiwhite programs. :1eye:[/QUOTE] Yeah, me and millions of other white guys who are the victims of DEMOCWACY.
Freeking herd rule.