The A.M.T.: An Uninvited Guest of the Middle Class

[RamboLiberal]

http://www.nytimes.com/2004/02/29/business/yourmoney/29amtt.html?pagewanted=1

WHO, me? Rich?

F. Scott Fitzgerald may have gotten it wrong. In the eyes of the tax collector, at least, the rich are not so different from you and me.

Some 2.6 million taxpayers this filing season will be caught in a tax net that was never intended for them, and many millions more will have to spend time or pay a tax professional to establish, through complex calculations, that they have no extra tax liability.

The cause is the alternative minimum tax, which was inspired by a disclosure to Congress in 1969 that 155 wealthy Americans who earned at least $200,000 in 1966 paid no income tax. That led to the creation of a sort of parallel tax universe, intended to make sure that even the richest Americans with the most sophisticated tax advisers would pay something, no matter how cleverly they arranged their financial affairs.

Now, however, partly because the A.M.T. was not indexed for inflation, the decidedly nonrich are feeling the bite.

"It's getting the upper-middle-income people" already, said Gary C. Pokrant, a tax principal at the accounting firm of Reznick Fedder & Silverman in Bethesda, Md. "In coming years, it's going to get closer to the center of the middle class.

"The world ends then," Mr. Pokrant predicted. "People aren't going to tolerate that."

[papau]

1. Effect on middle class in actual dollars is very small - but better would

be to fix regular tax, make capital gains tax flat 25%, make investment income tax flat 25%, allow deductible tax free gains and interest of 10,000 in each category -

and double the income level point where the alt min tax begins.

[starroute]

2. Bush's deficit projections assume the AMT is going to stay

If you assume (quite reasonably) that the tax is going to have to be cut back to relieve the middle class, the deficit picture suddenly becomes a *whole* lot worse.

Of course, the administration isn't telling us any of this.

[papau]

3. It only adds $450 billion over 10 years - and although small middle class

effect - he will used that effect to pass it!