From Reuters, " IRS: Tax Cuts Would Expand Minimum Tax Bite"
Unless Congress acts, millions of U.S. taxpayers will be shocked in April 2006 as they do their taxes and discover they owe the government much more than thought, according to the Internal Revenue Service's taxpayer watchdog."These are compliant taxpayers who are trying to file their returns and they're getting hit with this and I have a concern about it," said Nina Olson, the National Taxpayer Advocate, in a recent interview with Reuters.
The reason will be the Alternative Minimum Tax, which requires some middle and upper-income taxpayers to calculate their taxes in two ways and pay the higher bill. The AMT, created in 1969 to catch rich folks who managed to avoid income taxes, is increasingly dipping into the middle class. Olson says the problem will get worse unless Congress acts soon.
That is because exemptions to the AMT approved in earlier tax cut bills expire in 2005. In the spring of 2006, when filers do their 2005 taxes, they may find that even if President Bush gets past income tax cuts made permanent, about 12 million taxpayers may fall under the AMT. Olson said Congress has to deal with the AMT if it is to deal with the issue of making tax cuts permanent.
"They're going to have to deal with the AMT somehow, because otherwise the tax cuts are just going to draw more people into the AMT," Olson said.
Because of one of the perverse characteristics of the AMT -- its calculations include the difference between what one would pay under the "normal" tax system and what one would pay under the AMT -- the more filers there are in tax brackets below the AMT's 26 percent rate, the more become potentially eligible for the AMT.
But paying to get rid of the AMT would be expensive as the White House and Congress mull a budget expected to hit a record deficit of about $500 billion this year.
According to a paper by the non-partisan Urban-Brookings Tax Policy Center, repealing the AMT would cut revenues by $660 billion through 2014 if the Bush tax cuts expire as currently planned. The cost would be a higher $1.090 trillion if the cuts are made permanent, as the administration has said it wants.
The Congressional Budget Office, in its newest budget estimates on Jan. 26, said, "With each passing year, the AMT plays a bigger role in revenue projections."
Just wanted to applaude your research for it's thoroughness and insight.
Good to see the First Amendment in action!
M. Fox
St. Petersburg, FL
Let's get back to basics:
The major reason for President Bush's tax-cut was to combat the recession. I won't debate how effective this has been, as Republicans see it one way and Democrats another.
However, at least the Republicans are honest about what it is - a tax cut. A tax cut is a cut in taxes to those who pay taxes. It is simple logic that those who pay more will get more back.
I'm a typical middle-class American, and I have listened to all these misleading comments about how we got such a small tax cut. My own taxes have been reduced over $4000 since the tax cuts started in 1996. Why? Because I have 4 children and 4 Child Tax Credits. I have greatly benefited by the tax cuts - even more than I would have asked for. It is a very tangible way that President Bush has attempted to support working Americans with families.
You might debate the wisdom of the tax-cuts, and the resulting deficit, but at least be honest about them.
Here's one Arkansan who won't be voting for John Kerry!
