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hfojvt Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 03:59 PM
Original message
I support the AMT
at least I oppose radical changes in it

I hope this chart works showing who pays it. Basically it makes sure people pay taxes above a certain rate. It adds back the following itemized deductions.

deductions added back - medical expenses less than 2.5% of AGI, employee expenses, tax preparation expenses, local taxes

So, to read the chart. A single person with an AGI (Adjusted Gross Income) of $55,000 would only be hit with an AMT if his taxes were below $3,835 which would be a 6.97% tax rate. The only way that would happen is if he had itemized deductions of $23,950. Instead of being some huge 'tax penalty' the AMT would most likely not increase his taxes over $8,494 which are the taxes that those of us who do not (or cannot) itemize deductions. Finally, a person making $55,000 is making more than 59.35% of American households.

I am not sure what changes are being proposed, but I really do not see the need to do more than move the threshholds a little higher, maybe up to $50,000 for a single person and to $70,000 for a couple. I did the numbers for a family of four. Under current law, a single person can put $5,000 in an IRA and reduce his AGI by that amount ($10,000 for a couple) and the family of four gets $2,000 in tax credits for their kids.

AMT relief seems to be targeted at a select number of higher income taxpayers who itemize alot. I would rather see the standard deduction increased by $2,000 or so, which would help more lower income people, and might discourage some people from itemizing, which I still see as largely loopholes for the wealthy.

single
income AMT threshold itemized deductions tax at standard percentile

<40,250 ** none ---------------------------------------------- 45.4
45,000 ** 1,235 (2.74) ** $32,000 *** 5,994 ** 50.4
50,000 ** 2,535 (5.07) ** $27,750 *** 7,294 ** 54.87
55,000 ** 3,835 (6.97) ** $23,950 *** 8,494 ** 59.35
60,000 ** 5,135 (8.55) ** $23,400 *** 9,744 ** 63.05
70,000 ** 7,735 (11.05) ** $22,950 *** 12,244 ** 70.16
80,000 ** 10,335 (12.92) ** $22,500 *** 14,794 ** 75.84
90,000 ** 12,935 (14.37) ** $22,100 *** 17,594 ** 80.49
100,000 ** 15,535 (15.54) ** $22,250 *** 20,394 ** 84.07

married filiing jointly
<58,000 *** none ------------------------------------------- 59.35
60,000 ** 520 (.9) *** $42,400 *** 4,966 ** 63.05
65,000 ** 1820 (2.8) *** $35,700 *** 5,724
70,000 ** 3120 (4.46) ** $32,000 *** 6,466 ** 70.16
80,000 ** 5720 (7.15) ** $24,700 *** 7,966 ** 75.84
90,000 ** 8320 (9.24) ** $18,200 *** 10,444 ** 80.49
100,000 ** 10,920 (10.92) ** $17,800 *** 12,944 ** 84.07
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Cessna Invesco Palin Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 04:01 PM
Response to Original message
1. Oh, please.
I itemized nothing and got whacked by it because of my stock options (now worthless.) A lot of normal people get fucked by the AMT. I have nothing against trying to go after those who're taking advantage of the situation, but the reality is that a lot of average middle class folks get fucked by it for no particularly good reason.
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papau Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:32 PM
Response to Reply #1
9. Stock options - if you had sold them - would have put enough cash in your pocket to make you
Edited on Sat Nov-17-07 05:32 PM by papau
subject to the AMT?

If you could not "sell them" (and there are many ways to "sell" as any tax advisor could have told you) they were not taxable.

Hard to see how the AMT was unfair to you.

The AMT kicking in means you took enough deductions to bring your tax rate below the AMT rate - so those deductions were lost so that you would at least pay at the AMT rate - a rate that is lower than the regular tax rate.

Sounds like you did well - and then made a bad investment decision to hold on to the options rather than sell or do the equivalent of selling.
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HughMoran Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 04:04 PM
Response to Original message
2. Completely disagree
Edited on Sat Nov-17-07 04:05 PM by HughMoran
There's lot's of us not so well off folks who could be hit by this blind-side tax hike with no warning. It's completely unfair since it has not been adjusted for inflation for many, many years.
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WCGreen Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 04:09 PM
Response to Original message
3. As a tax preparer, I see people get hit by the AMT all the time...
especially if they have a one time state tax expense or a high rate of un reimbursed employee expenses...

It needs to be ratcheted back up by indexing the tax for inflation...



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papau Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:36 PM
Response to Reply #3
10. Hard to feel for "unreimbursed employee expenses" as they are usually vacations and office in the
home and attempts to write off the car or second home.

However I do agree that the deductible needs to be raised as it is not meant to go after the creative accounting of the under $200,000 a year set.
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WCGreen Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 06:07 PM
Response to Reply #10
14. Give me a break...
THe people that I handle are starting out as salespeople and have to usually prove they are good at sales before they get reimbursed for out of pocket expemses...

Making general statements like that really diminsh the power of your argument...
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papau Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 07:20 PM
Response to Reply #14
15. I also handle new salesmen's tax returns - who are making next to nothing and want to
Edited on Sat Nov-17-07 07:25 PM by papau
claim every expense as a business expense.

If they can't handle AMT limitations have them go sub-s and file showing no income

If the employer will not allow that - as with a life insurance agent - then if these new agents are making enough to exceed AMT deductions they are in the top 1% of the top 1% of new hires - and after deductions they will pay little still. If they get too creative and get below 5000 they may even lose the summer camp child care deduction on the regular FIT. :-)

Sorry, while there are some AMT problems dealing with very large families and with the various cliffs and bend points not being adjusted for COLA, "business expense that can not be deducted is not a per se problem - if that is the problem they are seeing, the real problem is that their income is too low and they should not consider pocket expenses to be part of the capital that they are investing in this selling gig - inefficient selling extra expenses of living, or if you like cost of the schooling needed for future success in selling, is just not a tax deduction.

On edit:

EITC is the area that needs simplification - I volunteer to the community centers to get folks through that chore - and even simple filings take 90 minutes and a lot of questions and my telling the person if they have, or have not passed the quiz that determines if they are deserving. The dollars "lost to error" are so small compared to the trust and partnership dollars hidden by the rich that chasing the poor in this excessive means test is a waste of IRS time.
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Nite Owl Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 04:10 PM
Response to Original message
4. It hurts people who
are in states that have higher wages and higher incomes, like NY. 55k isn't even middle class in parts of NY.
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papau Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:37 PM
Response to Reply #4
11. True - but you also need a lot of kids. But I agree - this part should be fixed.
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Warren Stupidity Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 04:28 PM
Response to Original message
5. Yes indeed crap the tax out of the middle class.
The AMT should be cola adjusted to where it was when it was inserted into the tax code.

Here, read up: http://www.house.gov/jec/tax/amt.htm

The AMT is not indexed. The most important features of the regular income tax (the tax brackets, standard deduction, exemptions for dependents, and so on) have been automatically indexed for inflation annually since 1985. The AMT is not indexed. Congress has periodically raised the exemption amounts for the AMT, but not fast enough to keep pace with inflation. The exemption of $20,000 that applied in 1979, the first year the AMT went into effect, is more than $53,000 in today's dollars. The current exemption amounts, in place since 1993, are $45,000 for married couples filing jointly (half that for each spouse if they file separately), or $33,750 for single filers or heads of households. To adjust for inflation since 1993, the exemptions would have to be raised to approximately $54,000 for married couples filing jointly and $41,000 for single filers.

A feature of both the AMT and the regular income tax is that neither is indexed for real (inflation-adjusted) growth in incomes. Even in the regular income tax, which is indexed for inflation, people move into higher and higher tax brackets if the economy is growing over the long term and average real wages are growing, too, as they normally do. Real growth in incomes tends to move everybody into higher tax brackets even if nobody's position changes relative to other wage earners. This phenomenon is called "real bracket creep."

Under current law, the number of taxpayers affected by the AMT will grow explosively in the coming years. Because the United States has low but persistent inflation, the lack of indexation in the AMT implies that under current law, eventually most taxpayers will move out of the regular income tax into the AMT. Even if the AMT were indexed for inflation, though, growth in real wages implies a similar trend, though occurring at a slower pace. Without a change in the law, a tax intended to apply only to high-income taxpayers will eventually become everyone's tax.

Over the last ten years, the number of people affected by the AMT for individuals has jumped ten-fold, to an estimated 1.3 million in 2000.20 But unless current law is changed, the AMT's years of explosive growth are just beginning. By 2010 it is projected that 17 million people will be affected by the AMT: 12.1 million directly, by having to pay the AMT, and 4.9 million indirectly, by being able to claim fewer credits on their regular income tax than they otherwise would. An especially large jump will come in 2002, when certain provisions currently in effect expire. (The provisions exclude child and education tax credits from the AMT.) The number of people affected by the AMT will almost double that year.21

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Common Sense Party Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 04:32 PM
Response to Reply #5
6. "Crap the tax" out of the middle class?
Or "tax the crap" out of them?

I think the middle class has to crap a lot of taxes as it is, so either way, I guess your phrasing would be correct.
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Warren Stupidity Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 04:38 PM
Response to Reply #6
7. I meant what I sez and I sez what I meant.
The middle peasants fighting the upper peasants while allied with them for shitting on the lower peasants is a game indulged in by the aristocracy ever since there was one.
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papau Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:38 PM
Response to Reply #7
12. and you said it well :-) - the system should include COLA adjustments
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YankmeCrankme Donating Member (576 posts) Send PM | Profile | Ignore Sat Nov-17-07 04:48 PM
Response to Original message
8. Maybe I'm mistaken, but most of the posters to the OP are saying the same thing he is
"...but I really do not see the need to do more than move the threshholds a little higher..."

That is the same thing as adjusting for inflation, is it not? I think he is just saying adjust the AMT, don't gut it or eliminate it.

I could be misreading the posts and I don't know much of anything about the AMT.
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papau Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 05:41 PM
Response to Reply #8
13. I think you are right - and the extreme complications are needed to catch the rich and their
extremely creative investments (and it still does not do a really great job with those investments).
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Warren Stupidity Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Nov-17-07 07:32 PM
Response to Reply #8
16. "a little higher" is a sick joke
The original AMT was meant to catch up the very wealthy who were paying no tax. The threshold ought to moved up by around a factor of 10 and NEEDS TO BE AUTOMATICALLY ADJUSTED for inflation so that those corrupt bastards in washington can't just re-inflate this into what it is today: yet another tax on the fatal condition known as 'being middle class'. Millions of middle class metro-region families are getting hit by this tax. It has became just another way of screwing us.

The OP seems to think that a minor adjustment: "maybe up to $50,000 for a single person and to $70,000"- say what? People making $50,000 are not the very wealthy, they don't even hit the FICA limits. Families making 70,000 are just barely over the limit for qualifying for SCHIP subsidies. Try $500,000 for starters.
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hfojvt Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 05:49 PM
Response to Reply #16
17. but it does not hit people making $50,000
unless they have something like $30,000 worth of itemized deductions, which is kinda suspect to begin with.

Citizens for Tax Justice seems to agree with me

http://www.fiscalpolicy.org/amtst0306.pdf

"The Alternative Minimum Tax allows a single large exemption, which was originally designed to ensure that low- and middle-income taxpayers will not be forced to pay the AMT. But the last permanent increase in the AMT exemption took effect in 1993, when the exemption for married couples was increased to $45,000.
Temporary tax cuts enacted in 2003 increased the married exemption to $58,000 for tax years 2004 and 2005. But under current law, the exemption drops back to $45,000 starting in 2006. Inflation has sharply reduced the real value of the exemption since 1993; if the married AMT
exemption had kept up with inflation since 1993, it would be almost $63,000 in 2006. The Senates AMT fix would restore the AMT exemption to approximately its real 1993 value, while the House AMT reform offers a slight increase over the temporary 2005 exemption amount."
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1932 Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 08:06 PM
Response to Original message
18. AMT makes tax code less progressive -- it lowers the point at which people start paying the highest
rate.

Which means it groups more people together at the same rate who have incredbily different wealth leveles.

Instead of lowering the entrance point for the highest tax rate, why don't we add a higher rate for people farther out on the wealth scale?
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roamer65 Donating Member (1000+ posts) Send PM | Profile | Ignore Sun Nov-18-07 08:10 PM
Response to Original message
19. We need to dump the AMT and increase tax rates on the wealthy.
If you make over $300,000/year, you can afford to pay %50 of it in taxes.
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