AMT Is Thorn In Tax Cut Package
October 2, 2000
The Alternative Minimum Tax was originally established to ensure that a few well-to-do families pay their "fair" share by forcing them to pay more when deductions or other tax breaks push their tax bills below a minimum. But increasing numbers of taxpayers are becoming ensnared in its provisions -- and those who are now being confronted by it are often in the middle-income class.
Only one million or so taxpayers get hit with the AMT now. But the number will soar to about 14.7 million in 2010, according to a new study by the Joint Committee on Taxation.
The impact of the AMT is particularly worrisome to supporters of Gov. George W. Bush's proposed tax-cutting package, experts say.
- The study estimates that under the Bush tax agenda, an additional 12.2 million taxpayers would be subject to the AMT.
- It suggests that by 2010, most taxpayers with incomes over $75,000 probably would be paying the AMT.
- Eliminating the AMT impact would add nearly $200 billion to the Bush plan's $1.3 trillion cost, the committee report estimates.
The AMT operates like a parallel-universe Form 1040 -- with its own rules for taking deductions and its own rates. Taxpayers must pay their AMT liability whenever it ends up higher than their regular tax bill.
Generally, the AMT has somewhat lower rates than the regular income tax, but much stricter rules on deductions and exemptions.
Bush advisers say that Democratic presidential candidate Al Gore's tax plan has AMT problems. But they can't be quantified for lack of details.
Source: John D. McKinnon, "Study Finds Bush Tax Cut Would Force More Americans to Pay Minimum Levy," Wall Street Journal, October 2, 2000.
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