Congress passes AMT patch

[youbet]

Quote:

Originally Posted by FIRE'd@51 IIRC, the Senate version passed 88-5, so many Dems went along with it.

Kind of an understatement. Didn't almost every Dem go along with it? Supported very, very heavily by Dems.

[samclem]

Quote:

Originally Posted by youbet This should have been made revenue neutral and any Dems that didn't back the revenue neutral provision should, of course, be skinned alive.

The "Pay-go" (e.g. pay-as-you-go = revenue neutrality) idea will go the way of Congress's promised earmark reform.

Anyway, I don't know if Pay-go should really apply in this case. If you take the view that the AMT was known to be on the books and that the government was counting on the revenue it would raise, then PAYGO would kick in when the limit was raised, and offsets would need to be found. However, if the present AMT law is viewed as piece of poorly-crafted legislation which, due to an oversight, has no inflation factor built in, then there are no offsets necessary. After al, the AT was going to raise taxes for millions of Americans, so just eliminating a tax increase shouldn't require a corresponding cut (again, from this perspective).

As it happens, the GAO and the CBO do a terrible job of predicting the actual impact of tax legislation, since they generally use static models that assume humans are automatons who will not vary their behavior in response to tax law changes. So, Paygo is flawed from the start.

[igsoy]

Quote:

Originally Posted by DangerMouse You seem to forget that many of us ordinary tax payers are caught in AMT hell. We are certainly not incredibly wealthy, we do ok by many standards. However, AMT triggered for us even though we have no deductions besides donations to charity and state tax. We have no dependents and I think our contributions for Federal tax before adding in the AMT was more than sufficient. We live in a State (Ca.) which requires high incomes just to get by.

DM, I didn't forget anything, everyone realizes the AMT is a bad thing for people such as yourself, it is the failure of the revenue neutral thing which should have happened with the fix that we are objecting to. Of course the Dems all voted for the lesser bill, the house bill was being blocked, and they were coming down to the IRS deadline, so they settled. But the dems really wanted the bill that would have had the AMT fix offset by closing off-shore tax shelter loopholes and taxing hedge fund manager's share of profits as income. All the rep. senators and a few of the corporate owned dems wouldn't let that better bill through.

[youbet]

Quote:

Originally Posted by igsoy All the rep. senators and a few of the corporate owned dems wouldn't let that better bill through.

Not true. Check your facts.

Edited: Nevermind igsoy. The guy I was thinking of didn't vote, as opposed to voting for. And I don't want to arm wrestle over exactly who the "corporate owned" dems are. So, your "all" assertion, while open to question due to the 46:48 vote, is close enough for this discussion.

[igsoy]

Quote:

Originally Posted by youbet Not true. Check your facts.

Okay, I can't find it anywhere, which republican senators were for the offsets?

[chinaco]

Since there is an AMT, it should probably only kick in for people that are making above $200 or $300 k per year. Perhaps even a bit higher.

Our tax system is so convoluted ... I do not like the overall approach to progressive taxes.

A progressive tax system can work... but all of the attempted loopholes and patches on it have turned it into a mess.

[Independent]

Quote:

Originally Posted by DangerMouse You seem to forget that many of us ordinary tax payers are caught in AMT hell. We are certainly not incredibly wealthy, we do ok by many standards. However, AMT triggered for us even though we have no deductions besides donations to charity and state tax. We have no dependents and I think our contributions for Federal tax before adding in the AMT was more than sufficient. We live in a State (Ca.) which requires high incomes just to get by.

This is probably the view of the majority of AMT payers. I'll take the contrarian position and say that "AMT hell" is something of an overstatement. I don't know how you got into an AMT position, but I can do some sample calculations for a "typical" high income family.

The median income for a family of four is about $70,000. Consider a family with 3 times that income, or $210,000. I think that if they get "caught" by the AMT, then the total of their regular FIT plus their AMT will be about 12% of their gross income.

That's a significant amount of money. But the total individual FIT is about 10% of total personal income. IF we're going to collect that much in FIT, it seems pretty plausible that a family with 3x the median income would pay slightly more than 10%.

Now the "IF" is a big deal. I find it easy to say that the federal gov't spends "too much", so we need to collect too much in taxes to cover all that spending. But, IF we're going to spend that much, we ought to collect enough tax to pay for it, and the AMT doesn't seem to be a terribly "unfair" tax to me.


My calculation for a "typical high income family" goes like this. (Maybe I'm misunderstanding the AMT rules, but this is what I get from the worksheet in the tax return.)
The AMT allows deductions for 401k contributions, charitable contributions, and mortgage interest. Suppose they add up to 25% of this family's $210,000 gross income. That leaves $157,500. Then they get the $66,250 fixed deduction, leaving $91,250 taxed at a flat 26%. That's $23,725. If their regular FIT is less than this, then AMT increases the total up to this amount. So the FIT including AMT is 11.3% of their gross income.

[Rustic23]

The AMT effecting 'us' is a classic of what I have pointed out before.

The people on this board that want to tax the rich are talking about themselves! I wager the majority of the posters on this board would be considered rich by 50 to 60% of the population.

[meridiver]

It's not that I object to paying more taxes. What I do object to is the parallel AMT tax universe that many of us inhabit. Those of you who don't pay it have no idea what a pain it is to calculate.

I just wish they would raise the tax brackets and eliminate the AMT. Then at least I'd know where I stand, and I wouldn't have to pay a tax preparer $700/yr to do a return that I would otherwise be perfectly capable of doing. Unfortunately this is unlikely to happen since no politician wants to "raise taxes" openly, they instead want to pretend that they are keeping them lower even though the effect of the AMT is the same as raising them.

[WanderALot]

Quote:

Originally Posted by REWahoo Can you provide us a link?

I think this is it:

Tax Calculator - Tax Tools and Calculators - H&R Block

[REWahoo]

Thanks.

[clifp]

Quote:

Originally Posted by meridiver It's not that I object to paying more taxes. What I do object to is the parallel AMT tax universe that many of us inhabit. Those of you who don't pay it have no idea what a pain it is to calculate. I just wish they would raise the tax brackets and eliminate the AMT. Then at least I'd know where I stand, and I wouldn't have to pay a tax preparer $700/yr to do a return that I would otherwise be perfectly capable of doing. Unfortunately this is unlikely to happen since no politician wants to "raise taxes" openly, they instead want to pretend that they are keeping them lower even though the effect of the AMT is the same as raising them.

I agree with you and it was my primary objection with AMT. Now that I no longer pay AMT, but have to go through the calculation each year to calculate how much of AMT tax credit carry forward I can use (argh what a mouthful) I have a different idea.

I think we should scrape the conventional tax and use the AMT system. AMT itself isn't all that complicated a couple of tax brackets, a very large standard deductions, and it pretty much eliminates the zillions of exceptions (e.g. special education and training credit for left-hand Native Americans, engaged in Mohair). It has some screwy parts but in general it does ensure that wealthy Americans pay taxes, and the big standard deduction would eliminate a lot of the petty cheating that Americans do with the current tax system.

[bamsphd]

My first choice would be a tax system indexed against my income. Everyone making more than me must compute their income and pay taxes. I would not need to compute my income, keep any records, or pay any taxes.

Returning to reality, my main objection to the AMT is simply that it requires me to compute my taxes twice. One set of paperwork is definitely enough!

Quote:

Originally Posted by clifp I think we should scrape the conventional tax and use the AMT system. AMT itself isn't all that complicated a couple of tax brackets, a very large standard deductions, and it pretty much eliminates the zillions of exceptions (e.g. special education and training credit for left-hand Native Americans, engaged in Mohair). It has some screwy parts but in general it does ensure that wealthy Americans pay taxes, and the big standard deduction would eliminate a lot of the petty cheating that Americans do with the current tax system.

Though I would probably pay more in taxes, I think that I would support an AMT only system, assuming it was indexed against inflation.

The idea almost reminds me of a tax proposal a few years back advocated by a presidential candidate with a magazine named after him.

[meridiver]

Quote:

Originally Posted by clifp I think we should scrape the conventional tax and use the AMT system. AMT itself isn't all that complicated a couple of tax brackets, a very large standard deductions, and it pretty much eliminates the zillions of exceptions (e.g. special education and training credit for left-hand Native Americans, engaged in Mohair). It has some screwy parts but in general it does ensure that wealthy Americans pay taxes, and the big standard deduction would eliminate a lot of the petty cheating that Americans do with the current tax system.

This would be fine with me also. The only problem is that sooner or later (probably sooner) our wonderful Congress would just start tacking on all of those "special" deductions and pretty soon it would look just like the old system. Realistically, I don't think there is anyway to keep their hands off the tax code. It is just too tempting of a target.

[Tadpole]

Quote:

Originally Posted by meridiver This would be fine with me also. The only problem is that sooner or later (probably sooner) our wonderful Congress would just start tacking on all of those "special" deductions and pretty soon it would look just like the old system. Realistically, I don't think there is anyway to keep their hands off the tax code. It is just too tempting of a target.

probably sooner is not even close. Certain things like mortgage interest would probably included from the get-go.

[audreyh1]

If AMT had been indexed to inflation, it would have kept the same limited scope it had when it was first created.

Audrey

[Alan]

Quote:

Originally Posted by bamsphd Though I would probably pay more in taxes, I think that I would support an AMT only system, assuming it was indexed against inflation. The idea almost reminds me of a tax proposal a few years back advocated by a presidential candidate with a magazine named after him.

ditto - I would pay more in AMT, but prefer the simpler approach with fewer loopholes.

[Independent]

Quote:

Originally Posted by meridiver This would be fine with me also. The only problem is that sooner or later (probably sooner) our wonderful Congress would just start tacking on all of those "special" deductions and pretty soon it would look just like the old system. Realistically, I don't think there is anyway to keep their hands off the tax code. It is just too tempting of a target.

I would also vote for the AMT replacing our current system - just because it has fewer complications. Simpler is better.

But I agree with meridiver, Congress would immediately start adding new holes, that's one way to get campaign money.

I'd go so far as to support a consitutional amendment that says "Regarding taxes on income, Congress shall not vary rates by the source, use, or form of the income."

[myself]

Quote:

Originally Posted by DangerMouse You seem to forget that many of us ordinary tax payers are caught in AMT hell. We are certainly not incredibly wealthy, we do ok by many standards. However, AMT triggered for us even though we have no deductions besides donations to charity and state tax. We have no dependents and I think our contributions for Federal tax before adding in the AMT was more than sufficient. We live in a State (Ca.) which requires high incomes just to get by.

Well, all I can suggest is to get some deductions. Or of course lower your income.
We paid only 2.49% in taxes last year due to deductions. Of course, I wouldn't suggest everyone get a short term mortgage (12.5 years left on a 15 year mtg) or have 4 kids either.

[myself]

Quote:

Originally Posted by meridiver It's not that I object to paying more taxes. What I do object to is the parallel AMT tax universe that many of us inhabit. Those of you who don't pay it have no idea what a pain it is to calculate. I just wish they would raise the tax brackets and eliminate the AMT. Then at least I'd know where I stand, and I wouldn't have to pay a tax preparer $700/yr to do a return that I would otherwise be perfectly capable of doing. Unfortunately this is unlikely to happen since no politician wants to "raise taxes" openly, they instead want to pretend that they are keeping them lower even though the effect of the AMT is the same as raising them.

Why is it a pain? There are plenty of programs that make this considerably easier and automatic since it is required by the Federal Gov't. Now, if you have a $210,000 household income (as someone else on this board calculated), I think spending a lousy $20 or so would be sufficient for your needs, thereby relieving you of the excrutiating pain of having to calculate it.