Musings from Brian J. Noggle

Puke on the AMT

Slate has a wonderfully ~~insightful~~ imaginative piece on the Alternative Minimum Tax as Bush's Secret Tax on Democrats:

President Bush and the Republican Congress, who believe fervently in cutting taxes for the rich, are quietly presiding over a most remarkable kind of tax increase for high-income Americans.

The Alternative Minimum Tax is becoming a miserable annual tradition for a growing group of prosperous taxpayers. (If you've just received a nervous phone message from your accountant—that's probably what she's calling about.) The AMT traces its origins to a minimum tax enacted in 1970 when Americans were scandalized to learn that some 155 high-earning taxpayers owed no income taxes in 1966. The AMT was originally designed so that people who had a lot of income but loads of deductions—through the standard exemption, the ability to write off property taxes and state income taxes—couldn't reduce their taxable income to next to nothing. Historically, it applied to a tiny minority of taxpayers. But with every passing year, more and more citizens are ushered behind the velvet ropes. This congressional backgrounder suggests that 1.8 million Americans paid it in 2001. Newsweek's nearly infallible Allan Sloan wrote earlier this month that "about 2.3 million returns for 2003 got nipped by the AMT." The numbers are set to rise exponentially in the next several years. A two-income couple in New Jersey—he's an accountant, she's a public school teacher—with combined income of $230,000, three kids, and annual property taxes of $15,000, could easily fall into paying the AMT. Even government bureaucrats get nailed. Last year, IRS Taxpayer Advocate Nina Olson paid the AMT.

Got that? It was enacted in 1970, and it's Bush's secret weapon. Maybe that's what he was doing when he was AWOL from Viet Nam, wot? Working in a secret laboratory devising a tax scheme to punish Michael Moore and Barbra Striesand in 2004.

I know about the AMT because I once worked for a startup and got stock options, and the AMT could have hit me badly if that company's options had been worth exercising. It's a crazy tax, but then again, I think most taxes are wasteful and most tax revenues are wasted. But the author of this bit "analyzes":

Republicans don't want to fix the AMT because fixing the AMT would require undoing their beloved tax cuts. Without the billions generated by millions of taxpayers getting slammed by the AMT, the marginal rate cuts would be impossible to sustain for the next several years, let alone make permanent. Without the AMT, the deficit picture would look far worse than it does.

No, actually Congress, which includes both mean Republicans and the kind-spirited but misunderstood by the ignorant heartland Democrats could cut income taxes AND eliminate the AMT if it would only cut spending, which is a far less palatable choice to the political porkivores.

The author of this piece, undoubtedly, is one of the persecuted residents of an enlightened coastal state s unfairly targeted for the AMT simply because ~~he's a nutbar~~ the Republicans want to punish the Democrat-voting states. Tax and spend works much better when only the "spend" part touches you, ainna?

(James Joyner has more, albeit less snarky, about this article.)

- posted by Brian J. @ 6:28 PM