Tax law aimed at the rich burdens other Americans
It seemed like a good idea when it started 35 years ago, and it was: Make sure the highest-income Americans contribute a reasonable amount in taxes.
But the alternative minimum tax no longer accomplishes that, and it is a growing burden on people who are not wealthy.
If you as a taxpayer fall under a complicated set of conditions, you may have to pay the AMT on top of your normal income tax. The complicated conditions are part of the problem. They make it difficult both to plan your life and to fill out your tax returns.
In addition, the AMT is hitting more and more people because it is not indexed for inflation. Money is not worth what it was in 1970, so the AMT rules may say you are rich when you're not. Robert Carroll, deputy assistant secretary of the Treasury, said two weeks ago that the number of individuals subject to the AMT will soar in 2006 — to 20.5 million from 3.8 million in 2005 — if something isn't done.
The New York Times reported Sunday that the AMT can affect taxpayers with incomes above $75,000. "But because of the way it is devised," The Times continued, "the tax affects far fewer of the very richest: about a third of the taxpayers reporting more than $1 million in income. One big reason is that dividends and investment gains, which go mostly to the richest, are not subject to the tax."
Clearly it's time to reform the alternative minimum tax.