Reply #1: Details on AMT below - It is a very minor hit to the non-rich

[papau]

The cry of pain you here is the closing of a few loopholes purchased by the rich, where we pretend income that the rich folks live off off is worth less than the income from wages, such as tax exempt interest.

First off tax rates are lower in the AMT calculation - 26% up to 175,000, 28% over that amount. But the loophole closing means you may have more income under the AMYT calc than under the regular FIT calc. In any case you pay either FIT or AMT - not both taxes - just the greater (however, some folks refer to the AMT tax as the additional amount that was paid that was in excess of the amount required under the regular FIT, even though it is not calculated the same way, and the marginal rate of 26% is lost sight of in this odd discussion of a subtraction being an increase in the marginal rate - a discussion that does not make sense to me).

The larger changes to the FIT adjusted taxable income after deductions calculation is a different exemption amount - in 2003 $49,000 on Joint return, $35,750 on single, and $24,500 on married filing separate, with the deduction being reduced by 25% of the amount the calculated AMT income exceeds $150,000 on a joint return, $112,500 on a single return, and $75,000 on a "separate return".

"Adjustments" (loophole closing in most cases) include a slower depreciation rate such as straight line - same amount each year - rather than pushing a pretend loss into the early years of a property used for the production of income. "Operating loss" recognized in any one year can not exceed 90% of that years income, there is no deduction for itemized "misc. deductions", medical expense hurdle increased from 7.5% on FIT to 10% in AMT calculation, state and local taxes not incurred in the production of income are not deductible, no deduction for personal exemptions, stock option transfer gains loophole closed, tax shelter farm loophole closed unless final accounting on disposal of farm interest, indeed passive activity - read loophole - losses are also not allowed unless the AMT is being calculated with regard to a bankrupcy.

Then we add "preference" items that the FIT pretends are not income or are deductions from income are in some, partial or total way, added to the FIT income reported. The ability to take a "depletion" deduction in excess of the cost basis of the property is ended (with exemptions for some folks - mostly in Texas), limted intangible - as in pretend - drilling costs deductions to 65% of well income, add back tax-exempt interest on specified - not all - private activity bonds, and closing the gain on sale of certain small business stock loophole where "closed" is via an add back to income of 28% of such gain.

And to top it off, the excess tax you pay over FIT becomes a tax credit for later years against the regular FIT!

It is really hard to see where any of the above is a sad situation that requires change. Unless of course you note that some of the tax cut for the rich may be "lost" because of the AMT calculation, being converted from real cash to a tax credit against future FIT taxes.

Because the rich can turn a million dollar income into a 60,000 dollar FIT adjusted tax income via the loopholes, you will hear that folks making 60,000 are affected by this evil tax.

Yeah, right.

And Bush's tax cut for the rich gave most of the cut to the middle class and stimulated the economy and is the cause of the growth in jobs - right?

sigh, :-)