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Millions could be left in dark over AMT
Investment News ^ | November 25, 2012 | Editorial

Posted on 11/27/2012 3:26:21 AM PST by taildragger

Taxpayers probably won't have a clear idea of their 2012 tax obligations until the last minute this year — and possibly not even then. They could find themselves owing several thousand dollars in income tax that they didn't plan for and may not be able to afford.


TOPICS: Business/Economy; Editorial
KEYWORDS: amt; amttaxes; congress; fiscalcliff; taxes
That is because the alternative minimum tax is caught up in the negotiations about how to avoid the looming fiscal cliff, and, unfortunately, it is likely to be a key bargaining chip in the negotiations.

Democrats think they have the upper hand because of President Barack Obama's re-election and his threat to veto any plan that doesn't increase taxes on the rich. They will be able to blame Republican obduracy if the cliff isn't avoided, huge tax increases hit everyone and the economy falls back into recession.

However, the Republicans think that the AMT patch is a vital weapon in their negotiating arsenal, as those hit hardest by the tax would be upper-middle-class residents in Democratic strongholds — large coastal cities with high local income and property taxes.

For example, in heavily Democratic Maryland, about 6% of taxpayers owe the AMT each year. Without a patch, that number would jump to 38%.

Republicans are unlikely to agree to the AMT extension without something in return, because their view is that the Democrats will be unwilling to antagonize their core voters by letting the AMT affect more of them.

Congress typically passes a one-year patch to prevent the AMT from biting millions of middle-class taxpayers. The tax originally was aimed at high-income earners who used loopholes to avoid paying much income tax, but it wasn't indexed for inflation, and what was once a high income is now a middle-class one.

The result is that without an annual patch, more and more middle-class taxpayers will be required to pay the AMT.

If no action is taken this year, an estimated 28 million taxpayers will be subject to the tax, and they will face an average unexpected bill of $3,700 for 2012. Most haven't allowed for it in their withholding because they have never had to pay it. BUSH-ERA TAX CUTS

By contrast, if the George W. Bush-era tax cuts are repealed, the higher taxes won't be due until next year's filing season, and withholding could be raised to pay it.

If the Republicans continue to refuse to let income tax rates rise now for high-income taxpayers, Democrats could let the country go over the fiscal cliff as they have threatened. They would allow increases for all taxpayers and then restore lower rates for those earning less than $200,000 a year in the next session of Congress, when they will have more votes.

However, the Internal Revenue Service has warned that without an AMT patch, the 2012 filing season will be a mess. That's partly because the Internal Revenue Service hasn't programmed its computers to allow for the full AMT.

That would have to be done, and tax forms would have to be reprinted. At the very least, refunds probably would be delayed for months — weakening the economy.

Even if the new Congress were to pass a patch retroactively in the first session after the New Year, a period of uncertainty would sap economic vitality.

It is unacceptable that millions of people should have no clear idea of their income tax liabilities so late in the year, and it is another reason that the income tax code must be revised and simplified. Year-by-year AMT patches can't continue.

1 posted on 11/27/2012 3:26:26 AM PST by taildragger
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To: taildragger

Tax increases (and shutting down defense contractors) are the best weapon that the R-House has because the Senate Dems are more beholden to the wealthy special interests then anyone else. Tax increases will not help the economy but probably won’t hurt much in the short run.


2 posted on 11/27/2012 3:52:31 AM PST by palmer (Jim, please bill me 50 cents for this completely useless post)
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To: palmer

The stock market and bailed out banks seem euphoric over these tax hikes and such. I am appalled, but not shocked as lawmakers serve their own interests. Uncle sugar is alive and well.


3 posted on 11/27/2012 4:00:50 AM PST by momincombatboots (Back to West by G-d Virginia.)
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To: palmer

unfortunately in my blue state of Merryland people making $100K a year (such as familes of 2 middle class workers such as tenured teachers married to other professionals, or even successful small businesses) need to be slapped upside the head with an EXTRA $7K in AMT before they get see through this “tax the rich” scheme

of course the dummies will simply blame republicans to deflect the anger and even more calls for “the rich” to pay more so the dummies can keep their breaks

except in Merryland there aren’t enough republicans to blame so maybe that where we need to go with Cngress..oneparty rule agains.. but imho it will take a generation of single party rule for people to blame liberals for what they have done and what they intend to do and to discredit their policies)


4 posted on 11/27/2012 4:17:16 AM PST by silverleaf (Age Takes a Toll: Please Have Exact Change)
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To: taildragger

When the AMT is not adjusted, it will apply to anyone making over $45k per year.


5 posted on 11/27/2012 4:21:14 AM PST by Texas resident
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To: taildragger

Whew!

Ya scared me there!!

I read it as ATM!!!


6 posted on 11/27/2012 4:42:51 AM PST by Elsie (Heck is where people, who don't believe in Gosh, think they are not going...)
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To: Elsie

Obama voters need to pay their fair share

AMT for everyone!!!!


7 posted on 11/27/2012 4:55:05 AM PST by preamble
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To: taildragger

Isn’t this the general idea? To upset and destabilize the middle class and threaten those who would aspire to greater wealth and economic security, all in the name of fairness and perpetual Democrat domination of elected office?


8 posted on 11/27/2012 4:56:31 AM PST by Attention Surplus Disorder (This stuff we're going through now, this is nothing compared to the middle ages.)
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To: Elsie
Whew! Ya scared me there!! I read it as ATM!!!

LOL! It is a early morning FR phenomenon, apply more coffee Elsie, it helps :-).

9 posted on 11/27/2012 5:28:05 AM PST by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: Texas resident
When the AMT is not adjusted, it will apply to anyone making over $45k per year.

That would be me, but also a slew of dumbo Obama voters that I am forced to work/deal with. I will gladly pay more to see them squirm and blame Republicans. I'll point out that is only "fair" that we should pay more. The nice thing about going off the cliff is it gives them a small taste of what it will be like once the Fed stops jerking rates low for the politicans and we can't afford the interest on the debt.

10 posted on 11/27/2012 5:40:05 AM PST by palmer (Jim, please bill me 50 cents for this completely useless post)
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To: taildragger

Most people, especially the ones with their head up their a$$ who voted for 0, don’t know what the AMT is. Too bad it couldn’t apply only to 0 voters.


11 posted on 11/27/2012 5:51:57 AM PST by I want the USA back (Liberalism is the irreparable breakdown of the mind's ability to reason.)
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To: taildragger

There are going to be some pissed off liberals if their refunds are delayed. They don’t even know it’s a refund. They think the government is giving them money.

But, they shouldn’t have to worry. The republicans will cave. And by the way, a tax increase would kill me. I don’t make enough as it is.


12 posted on 11/27/2012 6:19:36 AM PST by Terry Mross (I haven't watched the news since the election. Someone ping me if anything big happens.)
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To: palmer

IBD Editorials

Breaking Tax Pledge Would Be Republican Suicide

Posted 11/26/2012 06:39 PM ET

Principle: Four well-known Republicans say they won’t honor their pledge to constituents not to raise taxes. The bitter pill they think their party needs is actually a cyanide capsule.

Sen. Saxby Chambliss of Georgia, Sen. Bob Corker of Tennessee, Sen. Lindsey Graham of South Carolina and House Homeland Security Committee Chairman Peter King of New York all made a solemn commitment to the people who bestowed upon them the privilege of representing them in Congress.

Here is the Taxpayer Protection Pledge from Americans for Tax Reform they signed:

“I pledge to the taxpayers of (the state or district represented) and to the American people that I will: ONE, oppose any and all efforts to increase the marginal income tax rates for individuals and/or businesses; and, TWO, oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.”

With entitlements broken and hurtling into bankruptcy and higher tax rates the last thing this battered economy needs right now, the pledge makes at least as much sense now as it ever did. But with the fiscal cliff weeks away, Republicans are obviously scared witless. Of all the flytraps ever set by Democrats, however, breaking the ATR pledge may well be the most poisonous.

http://news.investors.com/print/ibd-editorials/112612-634657-breaking-tax-pledge-destroys-gop-brand.aspx


13 posted on 11/27/2012 6:48:45 AM PST by KeyLargo
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To: KeyLargo

After 51 years as a registered & active Republican voter, I am ready to change my registration.

IF the Tea Party would grow into a viable designation, there is where I would go.


14 posted on 11/27/2012 8:33:02 AM PST by ridesthemiles
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To: Terry Mross

BTTT....


15 posted on 11/27/2012 9:32:00 AM PST by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: taildragger
BTTT....

Maybe Harry Reems I mean Reid should read this thread before he speaks about the negotiations and tanks the markets....

16 posted on 11/27/2012 1:21:01 PM PST by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: taildragger

BTTT....


17 posted on 11/29/2012 2:10:42 PM PST by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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