AMT will hit 15 million more in 2006

Associated Press ^ | 12-14-05 | Mary Dalrymple

[oceanview]

another area badly in need of reform - deductions that self incorporated persons can take. almost all of them deduct an automobile as a "business expense", which is baloney, those vehicles are used for personal use also (unless they are truly commercial vehicles like trucks, or persons who actually travel as part of their job outside their commutes to/from work). why must I pay for my car with after tax income, while someone else can deduct it? who uses a Porsche for "business purposes"?

[Atlas Sneezed]

Here is why the AMT is fundamentally wrong:

Congress says to the taxpayer: "there are some things we want to encourage you to do, for the good of the nation, and so we are going to give you a tax break for them. These things include investing in your local government bonds (tax free munis), owning your own home, paying your medical bills without government subsidy, financially supporting your local government, etc."

Then, a few good souls do exactly what Congress wanted them to do. Ross Perot, forsaking better yields on his investment, buys zillions in tax-free, low-yield Muni bonds, gets a modest rate of return (giving up zillions more he could have gotten elsewhere on other bonds), and has no federal tax liability. No problem, unless you listen to Democrat politicians who want you think that "the rich don't pay taxes, and are cheating with 'loopholes'".

Meanwhile, people stop investing in those bonds, so there is less money for local government, and more (in the form of increased taxes) for the feds. A simple recentralization of government power, contrary to the intent of Congress' deductibility of local taxes and tax exemption for local bond yields.

[oceanview]

the problem with that analysis is that the wealthy can structure their assets to avoid taxation using these methods (look no futher then Theresa Heinz Kerry) - while some "regular guy" earning wages on a W2 cannot. the original intent of the law was to thwart that type of structuring done by the wealthy to avoid taxation. we need not offer a "bounty" to the rich to buy homes and buy muni-bonds.

[HostileTerritory]

I love it. I swear sometimes Congress leaves mines like this in the tax code just to keep people angry and voting Republican to "cut taxes" only it doesn't happen.

[HostileTerritory]

Either you purchased your home 40 years ago or you're exceptionally thrifty with your choice of home for your income! :)

[Tallguy]

AMT = Backdoor Flat Tax (at ridiculously high rates).

[Tallguy]

Not true. The curb weight of the vehicle is the determining factor. For any other vehicle you have to determine the percentage of personal use of the vehicle. IOW, a business car is not totally deductable.

[oceanview]

yes, but that "personal use" portion of the vehicle is subject to heavy bending of the rules.

all I know is, I meet alot of people with a Benz or a Porsche who tell me "yeah, I write it off".

[gathersnomoss]

Make that two.

[Tallguy]

Well, join the game. It's not like it's an exclusive thing. If enough people take advantage of self-incorporation, you can be sure the government will take away the deduction. After all, it's the bucks their after.

[Sybeck1]

Steroids use by adults in pro sports is more important to tackle.

[Atlas Sneezed]

I disagree. We do need to motivate the rich to buy munis. Otherwise, municipalities would have to offer much higher rates, and they would have less money for projects.

[gathersnomoss]

It's not your money. Ask the politicians who their cash belongs to. Someone else is driving your car and using the money for a big screen TV.

Nice Christmas gift, eh?

[RinaseaofDs]

No it won't. The RNC chairman himself said that the era of small-government republicans is over. He believes that the voters want big government, and if the RNC were to take the other side of that argument, they would ultimately lose. He was on both Hannity and Limbaugh saying this earlier this year.

Well, big government means higher taxes. This is almost exactly like the immigration issue, in that neither party is interested in fixing the problem. The only people who want the problem fixed are middle class voters, who by themselves aren't exactly feared by anyone. Unless you are in some sort of interest group that can contribute cash to a candidate, your political interests mean squat.

So, R's will earnestly pledge to address it next year, as the current President gets lamer and lamer a duck, and they'll find a reason to earnestly ignore it in 2006.

[Atlas Sneezed]

I meet alot of people with a Benz or a Porsche who tell me "yeah, I write it off".

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Which they can do legally, subject to depreciation rules for different vehicle types, and as long as the vehicle is used for business (with limited personal use being a taxable benefit.)

Otherwise, they are no different from people who say "yeah, I don't declare my eBay profits or cash income."

The ability to cheat is not really a "loophole."

[Redleg Duke]

Ignore Hank...he is a Bush and Republican basher who revels in finding the negative about everything.

[Wolfie]

And yet, you expect our votes? Jam it, you parasitic thieves.

Let me be the first to say:

"Hillary! Hillary, Hillary, Hillary!"

[Atlas Sneezed]

why is it a bad idea? because I don't want to be paying full freight on my federal income tax, while some dude who has structured a 4 million dollar mortgage on his vacation Malibu beach house gets to get full credit for that deduction and reduce his federal income tax liability to some astonishingly low number.

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Then the solution is not the complex AMT, but limitations on the deductions you oppose.

I could live with elimination of deduction for mortgage interest on second homes. It might hurt the RV business, but real estate values in Jackson Hole and other vacation paradises are not exactly hurting.

I could also imagine a cap on the home mortgage deduction to the interest on indebtedness corresponding to a ~90th percentile home value, nationwide.

[Myrddin]

Either you purchased your home 40 years ago or you're exceptionally thrifty with your choice of home for your income! :)

I moved to Pocatello, Idaho and purchased a 3900 sq ft house on 1/3 acre for $180,000 in 2000. I was able to move $80,000 in net equity from my home in San Diego. The balance was paid off with stock. I still have to sock away $300/month for property taxes.

I declare single/zero on my W4. The tax cuts last year resulted in FIT/SIT refunds round $9,300. I used that as my total cash out of pocket to purchase another 2,000 sq ft house as an investment. The market rental for that property is around $750. My monthly PITI is $528. Cash flow positive even before deductions for tax, interest, insurance and maintenance.

My objective is to be debt free with enough cash flow from rental properties to cover my basic living expenses. I'm not really interested in working 70 hour weeks until the day I die.

[Atlas Sneezed]

I'd go so far as to say that if they don't pay taxes (income), they shouldn't be able to vote because they aren't contributing to the society they are trying to regulate.

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Good!

My alternate version is that anyone who chooses to receive a check from the government (perhaps in excess of their tax payments -who is a net tax receiver) forfeits their right to vote. That includes public school teachers, cops, welfare recipients, university professors who get government grants, food stamp recipients, public housing occupants, medicaid recipients. (What do all these folks have in common in their voting programs?)

I'd even include military to be fair, as they can serve the government elected by the rest of the citizens they serve.

We could debate whether Social security was a return of savings, or a handout invoking loss of voting rights. I'd say that for some it is, and some it isn't.

Imagine how taxation would change if those who lived off taxes had no say?