Alternative tax sneaking up on millions in US

Boston Globe ^ | April 15, 2003 | Susan Milligan

[sarcasm]

ASHINGTON -- Hundreds of thousands of Americans expecting a tax cut this year will instead have to pay an alternative tax that was designed to target the wealthy, but has increasingly hit the middle class, according to tax specialists and accountants.

[NoControllingLegalAuthority]

Government definition: Wealthy = Anybody working

[blackdog]

So leave the AMT in place, scrap the existing code, and set the AMT rate at 15% for everyone.

It's called a flat tax.

Use the AMT to say AMF to the IRS. Unintended consequences of a bunch of spineless polititical bastards can be turned on them for a change.

[biblewonk]

I don't pay any Federal taxes.

[philosofy123]

Lucky you. I am a working stiff, and got hit with this Alternative Minimum Tax thing? I did not even know it existed.

[blackdog]

This AMT will become the biggest vote grabber in history. Once the AMT will hit more than 50% of voting taxpayers, somebody will pander to that group to "SAVE" them from the clutches of run-away taxes. It will be a temporary rescue which will need reauthorization each year(in order to maintain loyalty) and will only be signed into law on something like midnight on April 14th of each year.

I am really amazed that a nation of a few hundred million apathetic sheep is what has evolved from a few thousand founders with balls and honor in only 200 years!

[blackdog]

Leona Helmsley speaks!

[blackdog]

Considering the creeping taint that the AMT is, will it not ensnare the Clintons, senators, congress-critters, and the like?

What special dispensation have they cooked up to unburden themselves of the AMT?

[Mamzelle]

I'm confused as to how this works...would you mind a summary of how it worked in your case? Apparently it hasn't hit me yet...

[blackdog]

If your deductions exceed a certain percentage of your income when you earn greater than a certain fixed number in your gross, you are dead meat because the AMT kicks in instead.

If you are in farming like I am, I will be it's victim in 2005. I plan on not purchasing the $5,000 of seed to plant, the $6,000 fertilizer, and idling my paid for equipment as well as return leased equipment.

On a good year farming, income might be 10% of expenses.

This will force me to rent my broken ground to a corporate grain interest, cull most of my livestock, and wait until tax laws change before farming resumes.

[E. Pluribus Unum]

Though both Congress and the administration agree that the schedule for paying the alternative tax should be addressed, neither is expected to initiate corrective legislation in the near future because it would cost the government hundreds of billions of dollars in lost revenues.

BWAAA-HAAA-HAAA!!!

Translation: We sure are lucky the tax system is so ridiculously unfair.

[blackdog]

Just wait though. Once two income earners figure out that the second spouses job, daycare, mortgage interest, a modest company bonus or stock option, and kiddies throws them into the jowls of the AMT, one spouse will quit work, stay at home, and send nadda to the treasury instead.

This is not something to defer acting on! Every time it stings the public, the public will respond.

I put in my quarters required for Social Security. Screw em. I didn't need that boat, vacation home, jet-ski, new car, or hair transplant any-hoo.

The AMT will kill consumer spending like a rejected credit card.

[philosofy123]

If you made good salary, and you have lots of expenses/deductions, there is a formula that compels you to pay extra taxes as a "minimum".

[philosofy123]

a nation of a few hundred million apathetic sheep

You got this right. Unfortunately, the grass root movements are mostly about silly things. WE need a grass root movement that reintroduces democracy back to us? If only 50% vote, and block of voters vote for a guy for some stupid reasons; such as his color, his religion, his look, republican, democrat, abortion,....At the end it is a matter of math! Whoever appeases enough fractions of the population to get a majority. The reality is this majority is not a majority at all.

[ChuxsterS]

I'm confused as to how this works...would you mind a summary of how it worked in your case? Apparently it hasn't hit me yet...

Here's another way it works.

If you exercise incentive stock options to buy your company's stock, and hold the stock, the AMT says that you have to pay 28% of your unrealized gains as of the date you exercised the options. In other words, for every $5 option you use to buy $20 stock, the AMT sees $15 of taxable income. Hence, you can be taxed on income you never received, and if the stock goes down, as lots of stock did in 2000-2001, you can end up in the hole with a big tax bill and nothing to pay it with.

You can poke around www.reformamt.org for more information.

[Mamzelle]

Thanks. I'm embarrassed to say I left the taxes to DH this year. He says that taxpayers are now required to to figure taxes two ways, and pay the higher. It doesn't happen to hit us...this year...

With your indulgence, I've been researching the situation of a liberal in my acquaintance, who was reimbursed in stock rather than salary a couple of years ago. (This guy has donated big sums to ACLU, Am Int'l, Planned Parenthood and various Dems whom I have opposed...). This stock has tanked. Is he in good shape with AMT, or bad? Does the ACLU get lucky next year?

[Mamzelle]

Tax invented thirty-four years ago--and is a big recent problem...doesn't quite follow.

[numberonepal]

OK Mr. President we're all very very tired of hearing these terrible stories about folks getting shafted for being married, for providing jobs, and for achieving. Those of us with the drive to achieve will continue to do so no matter what, and they very well know it. It's time for REVOLUTION folks.

We're over it, in other words! If this continues Atlas will shrug eventually. But how bad does it have to get before he does? Let's open our eyes and mouths here people. It's time for an end.

FReep anyone and everyone you can think of regarding H.R. 25
And support the Fair Tax

[ChuxsterS]

With your indulgence, I've been researching the situation of a liberal in my acquaintance, who was reimbursed in stock rather than salary a couple of years ago.

I'm not a tax professional; I just happen to have personal experience with the AMT. I know it applies with incentive stock options (ISO's), and other special income situations, and I also know the calculations are fairly convoluted... If your friend thinks he may be subject to AMT, he should definitely consult a CPA who's up-to-speed on AMT.

[Mamzelle]

Not a friend, but a political antagonist. Was curious to see if his pro-tax stand had borne fruit.

I've been reading around...Lieberman and another Dem are putting leg together to try to ameliorate AMT devastation to middle class.

[The Old Hoosier]

Tax invented thirty-four years ago--and is a big recent problem...doesn't quite follow.

The problem is, there's a dollar amount attached that qualifies you as "wealthy," and that amount has never been adjusted to reflect inflation.

[ScholarWarrior]

A good start, but still socialist.

I propose $1000 per head per year. Most of it goes to defense. Can't pay it, move to Canada or Mexico.

[patton]

Been there, done that. Cut our income by 80K this year, the wife quit, we shrugged.

Leeches can get their cash elsewhere.

[El Gato]

Tax invented thirty-four years ago--and is a big recent problem...doesn't quite follow.

From the article: The answer lies in the tax code, which has not changed to fully reflect the impact of inflation on the alternative tax. Taxpayers who might have been considered rich in 1969 are upper-middle class in 2003 dollars, said

A reasonably nice car could be had for about $2,500 in 1969, now a comparable car, although probably lighter and with a few more bells and whisles, would probably cost about $25,000. A person, or their parent, who was earning enough to make the cost of that car say 1/3 of a years salary, would have been earning $7,500/year in 1969, while now they'd have to earn $75,000/year, yet that 1/3 of a years a salary will still only buy one car. Yet the numbers that cause the alternative tax to kick in haven't changed since 1969.

It's not this simple, but say that tax kicked in at 30,000 dollars a year, In 1969 that would be someone who only had to spend 1/12 of their years income to buy a car, IOW a pretty well off person. Now, due to inflation it's someone who would have to spend 5/6ths or 10/12 of a years income to buy that car. Obviously they'd be looking for a cheaper car so they could pay the rent and buy groceries, but they'd still have to pay that tax. Inflation has in effect reduced the buying power of the trigger level.

[upchuck]

Go here^ for a simple to understand explanation of the AMT. Kaye Thomas is THE MAN!! Great web site!!

Then, once you're thoroughly disgusted with our onerous tax system, go here^ for the soultion to the problem.

It particularly pisses me off that the pubbies don't have the cojones to address the AMT problem straight up.

[henderson field]

That's just the point. A few hundred million sheep did not evolve from a few thousand founders. They came from other countries, not to build a great nation - that was already done by greater men than they. They came to get the money. Now we have a moral decay that resulted from people coming for money for 200 years, and people who owe allegiance to their homelands not to our land.

[c-b 1]

Been there, done that. Cut our income by 80K this year, the wife quit, we shrugged.

Leeches can get their cash elsewhere.

We have cut the size of our business back over the past two years, the down turn in the econcomy helped.

There is no chance the AMT got us.

The parasites can look elswhere to cover their excess spending.

[Brimack34]

I think they did this cause they thought Companies were hiding profits. We are a small Company and we are not hiding anything, the economy hit the skids. So we get nailed big time!! This sucks you make money they kill you. You do not make money they kill you.

[Princeliberty]

Another big government tatic.
When doing tax cuts bury all kinds
things in the build that will effect
take away much of the tax benefits.

And when increasing taxes bury in all
all kinds of things that will make
the increase even bigger.

[Princeliberty]

Hey but it was Republican Congress
and a Republican President that put
in the last bill and did not have
it go up as fast as inflation
so it would hit millions of middle
class tax payers.
So that's a lot better than a Democrat
Congress and a Democrat President
doing the same thing.

[blackdog]

I respect your opinion but I really disagree. Immigrants cut grass, clean hotel rooms, do farm labor, and hold several jobs at once. They have strong family values, don't divorce, and are what we once were.

Americans today are just apathetic spoiled brats, living off the hard work of the previous generations. The government and schools have told them that that's what they deserve.

That's my opinion FWIW.

[The Wizard]

The AMT must be repealed, killed, removed, done away with

[blackdog]

I hope Charlie Rangell and the rest of the Way's and Means Committee reads some of the comments like yours and mine.

The AMT might just likely half revenues to the treasury. As each family gets stung by it, they will respond just like a chess game.

The jeans I buy at Goodwill last just as long. The used farm equipment I buy runs just as well. The used cars I buy run great and cost less to insure.

Savings realized from daycare, commuting, work clothes, lunches, are at least $1,000 per month. Add the $600 per month for the taxes I was paying and for $18,000 per year it cost me to work, forget it. I don't need all that "stuff" Madison Avenue tells me I just have to go out and buy on the television.

Just from staying at home and feeding our boiler with wood(that I cut/split/dry) I save another $300 per month in the winters.

Sure with all the labor of farming and self sufficency I'm spending a fortune of my time, but time isn't listed on a W-2. Hard work is good for the spirit.