The recent hurricanes have re-energized critics of “President Bush’s tax cuts for the rich.” They want those tax cuts repealed – and any future tax cut proposals shelved.
But what if there is already a mechanism in current law that will likely gobble up most of any potential financial benefit from a tax cut?
According to the congressional Joint Committee on Taxation, over the next 10 years, the wealthiest Americans who would have been able to keep more of their own money, thanks to the Bush tax cuts, will instead, be hit by the alternative minimum tax (AMT) for nearly $739 billion.
But you haven’t heard anything about the negative impact of the AMT coming from the envy-mongers. No, they would prefer you to think that the rich are getting off tax-free. In fact, they are responsible for a growing percentage of the country’s tax revenues. And the middle class is increasingly being considered “rich” for tax purposes, because of the AMT.
Last year, the Congressional Budget Office (CBO) wrote:
- Taxpayers with AGI between $100,000 and $500,000 will be hit hardest by the AMT: in 2010, over 90 percent of them will have AMT liability. As inflation erodes the value of the AMT exemption, more of their income is subject to the alternative tax.
Married couples filing jointly are more likely to have AMT liability than unmarried taxpayers with similar incomes. For example, CBO projects that about 95 percent of married taxpayers with AGI between $100,000 and $200,000 will owe AMT in 2010, compared with 84 percent of single filers in the same income category.
The alternative minimum tax, made law in 1969 to make sure the richest would have to pay some taxes, has been around far too long. Isn’t it time to say goodbye? A growing economy is much better than a growing government.