Here Comes the Alternative Minimum Tax
December 18, 2003
The alternative minimum tax is hitting growing numbers of Americans. It is the most serious problem encountered by taxpayers, according to a report by Nina E. Olson, the IRS National Taxpayer Advocate
The alternative minimum tax is a highly complex, separate system for calculating your taxes. It was designed to prevent a small number of high-income Americans from completely avoiding federal income taxes. But its calculation wasn't indexed for inflation. Unless Congress overhauls the law, the tax's growth over the next decade will be explosive.
- About 3.3 million taxpayers will owe additional taxes next year because of the AMT -- up 27 percent from this year -- and more than triple the number in 1998, according to new Treasury Department statistics.
- Among taxpayers most likely to be affected are people with large families in high-tax areas, such as California, New York City and Washington, D.C.
- The problem will grow after 2004 -- 12.3 million filers will be hit in 2005, 15.3 million in 2006, 24.6 million in 2008 -- and 31.2 million in 2010.
Thus, if Congress doesn't overhaul current law, nearly 30 percent of all taxpayers with some positive individual income-tax liability will be hit by the AMT in 2010.
A 2001 Joint Committee on Taxation staff report offered a simple fix: Eliminate the AMT, both for individuals and for corporations.
Source: Tom Herman, "Minimum Tax Ensnares More People Each Year," Tax Report, Wall Street Journal, December 18, 2003.
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