Reply #5: Alternative maximum foot dragging

[54anickel]

http://www.prudentbear.com/randomwalk.asp

The season for celebration is nearly upon us. After all, Congress is preparing for recess, and soon our representatives will flee the capital, unable to fund any more bridges to tiny Alaskan islands, or finagle any of 6,375 similar endeavors spelled out in the transportation bill, or in any other bill for that matter. Soon, it will be the most wonderful of seasons, and Congressmen will have only the lobbyists to shake down as they enter the New Year. It is truly a time to sing “Hallelujah.”

At least, most years it is. But this year, we might want to give Congress another week, even at the risk they authorize a series of snow sheds for Death Valley. That’s because it looks like Congress will leave town with the Alternative Minimum Tax still on the books, which left alone, will spread like a flu virus in summer camp. That is, it will eventually get to everyone.

You’ve got to hand it to Congress; the Alternative Minimum Tax is a cleverly named piece of legislation. However, a more accurate name would have been “The Other Higher Tax” or “The Not So Fast You Owe Even More Tax.” That’s because the AMT is a second take on an individual’s income tax calculation. And if the taxes come out higher under this alternate scenario, then that’s the way the deduction crumbles. Also clever – just like higher property taxes, increases in the AMT are conveniently absent from the CPI.

For years, only rich people like lawyers and professional athletes had to worry about these alternate tax calculations. The tax was mainly designed to keep rich people with a smorgasbord of deductions from getting off without paying anything. But because the AMT was never indexed for inflation (surely an oversight), the tax is trickling down into the upper middle and middle classes.

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