. . . The AMT, as you may have had the misfortune of discovering, is hitting growing numbers of taxpayers who are further down the income scale. That's because (1) the level at which it takes effect isn't adjusted for inflation, so more taxpayers find themselves covered over time and (2) the Bush tax cuts lowered regular income tax rates, sweeping additional taxpayers into the alternative system.
Figures compiled by the Urban Institute-Brookings Institution Tax Policy Center demonstrate the AMT's dramatic effect. If nothing is done to fix the AMT and the Bush tax cuts are extended as he wants, 89 percent of married families with two or more children and incomes between $75,000 and $100,000 will be hit by the AMT by 2010 -- compared with less than 1 percent in 2006. By 2017, almost half of all taxpayers -- 53 million -- will owe the AMT. The tax will hit two-thirds of those making between $75,000 and $100,000 and 90 percent of those making $100,000 or more.
Looked at another way, what the Bush tax cuts give to taxpayers, the AMT grabs back. By 2012, if it isn't changed, the AMT would take back almost one-third of the Bush tax cuts. As the accompanying chart shows, it would take back more than half of the tax cut for people making between $100,000 and $200,000.
In fact, in an irony that only a tax geek could love, the AMT has been transformed from its original purpose, a means of assuring that the wealthiest pay at least some taxes, into a way of underwriting tax cuts for the wealthiest. Because the AMT hits fewer of those with the highest incomes, the rather comfortable end up subsidizing Bush's tax cuts for the super-rich. . . .
Wednesday, February 07, 2007
More on the AMT
Here's a bit from Ruth Marcus's interesting article about one of my favorite topics: The AMT: