Monday, January 15, 2007

The Alternative Minimum Tax Continues to Threaten

This blog has mentioned the AMT a few times. Here, here, and here, for example.

USAToday today mentions it, as well--and it's not a love-tap:

If you are one of the 3.5 million people who pay the Alternative Minimum Tax (AMT), chances are you have committed at least two of the following three offenses:

•You have a family.
•You live in an area with high taxes, high real estate costs, or both.
•You own a small business.

Just in case you missed, it, there's an emphasis on bullet #2, which is pointed directly at the heads of Wisconsin taxpayers.

...The AMT adds complexity to an already ridiculously complex tax code by making people calculate their taxes not once, but twice. On their regular taxes, people claim deductions for dependent children, local taxes and businesses expenses. Then the AMT kicks in and takes them away. The AMT only allows two significant deductions: mortgage interest and charitable contributions.

Because the AMT is not indexed for inflation, it captures more people each year. Currently it can hit couples earning as little as $62,550.

That number is less than two average-wage Wisconsin residents earn.

There's another familiar theme in here, too:

The AMT is, in effect, an automatic tax-increasing machine that stirs huge uncertainty because it is subject to the whims of Congress each year. Congress has allowed the AMT's bite to increase slightly, while taking credit for preventing its full fury to be felt, by tinkering with exemption levels.

Had it not done so last spring, more than 18 million people would pay it this April, rather than 3.5 million. In April 2008, some 23.4 million will be caught if another fix is not enacted this year.
While these temporary patches might seem like a reasonable short-term solution, they have become a big problem in themselves. Any tax that goes up automatically raises serious questions about government accountability. By acting every year to limit the damage, Congress ducks the larger issue and creates opportunities for new mischief with each annual tax bill.

In Wisconsin, we call that "taxation without representation." Eliminating that practice on the Gas Tax cost Tom Reynolds his seat; a vengeful teat-sucking roadbuilders' group spent a lot of money to dump him.

Last year, a commission chaired by former Senators Connie Mack (news, bio, voting record) (R-Fla.) and John Breaux (D-La.) provided a blueprint on how this could be done. It recommended a number of changes as part of a plan to eliminate the AMT and simplify the tax code.
Chief among the proposals was scaling back overly generous mortgage interest deductions (on loans of up to $1 million).

That plan was attacked by the powerful real estate lobby and ignored by Congress and the Bush administration.

Conveniently, the teat-sucker lobbies all begin with "R"--Roadbuilders, Realtors...

Well, let's see what happens this go-round.

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