Maximizing the minimum tax ("Watch out for the old shell game")

Washington Times ^ | March 20, 2005 | Alan Reynolds

[baseball_fan]

Proponents of unlimited tax and spending increases stumbled on a rhetorical gimmick for blaming President Bush for the foibles of his Democratic predecessors.

A New York Times editorial, "Mr. Bush's stealthy tax increase," claimed, "President Bush is presiding over a big middle-class tax hike." That is because rising nominal incomes will push more and more taxpayers into the "alternative minimum tax" (AMT).

Such partisan complaints are ironic because the AMT was invented by Democrats to squeeze more taxes from the rich. It does so by denying those with higher incomes deductions and personal exemptions available to other taxpayers -- that is, by denying equal treatment under the law.

Such discriminatory thievery first began as an extra 10 percent tax under President Johnson. But the modern AMT began in 1978 under President Carter, when the alternative tax was high as 25 percent on income that excluded many itemized deductions. The AMT was reduced to 20-21 percent under President Reagan, but subsequently raised by President Clinton to 26 percent on income between $100,000 and $175,000, and to 28 percent above that.

This Carter-Clinton tax has been creatively redefined as "Mr. Bush's" fault...

[baseball_fan]

"The Carter-Clinton AMT is a ridiculous tax, but how terrible it is depends on what sort of tax increases are proposed as the price to "adjust" or eliminate it. The [New York] Times says, "The obvious answer is to restore the alternative tax to its true anti-sheltering purpose by fully taxing capital gains and dividends under the alternative system." Under this scheme, the tax on capital gains and dividends -- which has nothing to do with sheltering -- would be nearly doubled. That sounds like an obviously awful answer to me, and to the Congress. Besides, contrary to the editorial, long-term capital gains can and do trigger the AMT."

[an amused spectator]

Actually, the AMT is a shining example of exactly how the scum in Congress view us serfs - mere cattle to be bled.

If we weren't, they've have indexed it to inflation a decade ago...

[WOSG]

"Besides, contrary to the editorial, long-term capital gains can and do trigger the AMT."

I can confirm that Alan Reynolds is right and the NYT is wrong on this... I am hit with AMT this year with a gross income between $150k and $200k, and I have barely any deductions. My'marginal tax rate' for some long term capital gains turns out to be almost 30% thanks to AMT hitting me.