Posted on 02/14/2007 7:12:49 AM PST by babble-on
Is the AMT really the realization of the Flat Tax? Is it therefore actually more fair and democratic than the regular tax code?
I wonder where my fellow Freepers stand on the issue of repealing, fixing or leaving in place, the AMT, which increasingly is going to become the main tax system in the country for people who actually pay taxes.
On the one hand, it results in a higher amount of taxes paid, on the other hand, it seems like a fair, flat tax that a few years ago some conservatives claimed to like.
I have my opinion, but I'd love to know what Freepers think, and I am willing to be be convinced, but for now, I kinda like the AMT compared to the byzantine 1040.
the tax code is so byzantine that even the experts don't know what it is doing so they invented the amt to make sure everyone pays something.
the better way is to scrap the byzantine code and the amt.
the amt is another patch to try to keep the air from leaking out of the tire.
What's interesting, is that if nothing happens, if congress cannot agree on any particular reform, the AMT just takes over on inertia in the next couple of years. What I'm wondering is whether that's not a decent real-world solution.
While the amt may be a flat tax more fair than the current mess otherwise known as the 1040 and associated forms, unless current tax law is repealed you still have to file the %#%$@$#@ 1040 and spend all the attendant time that entails.
So, just leaving the amt in place doesn't solve the time and expense issues of filing and enforcing 1040s.
so it doesn't fulfill one of the real benefits of a Steve Forbes style flat tax, which was simplicity. That's a good point.
Although I'm not quite affluent enough (yet) to worry about the AMT, I went through the motions last year to compute how it would affect me if I crept up a little higher, and it is kinda nasty. But as an earlier poster alluded, the very wealthy have ways of avoiding this bite.
So it falls to that part of the middle class where you are better off, but not able to invest/diversify/ re-allocate/wriggle your way out of AMT, and the hammer falls there.
The cutoff for the AMT, if it truly is there to 'catch' the wealthy tax-dodgers, is way too low, and penalizes folks that have not accumulated any wealth at all. It ought to kick in at 200K for individual and $400K for couple. Instead it was an attempt by democrats to redistribute the wealthy's $$, that was then bludgeoned into a tax raise on the lower-middle portion of the middle class.
I'm still waiting for my 1040 on a postcard style flat tax :)
The wealthy can't really avoid the AMT, the whole point of it is to make tax deductions impermissable. The wealthy eat the AMT just like everyone else. The problem is that when they wrote the legislation in the 1960's, one was "wealthy" at a much lower $ level than today.
On top of that, lower tax rates overall, have brought the regular 1040 rates to where they sit right on top of the AMT rates. Then when you eliminate the mortgage interest and state tax deductions, bang, 70 million taxpayers owe more under the AMT than under the regular system. The question is, is that OK? Why should mortgage interest and state taxes be deductible anyway, other than tradition?
don't hold your breath! I agree it would be nice though
My accountant would be sad...
"The wealthy eat the AMT just like everyone else. "
I don't think you really understand the "wealthy" and their sources of income. They do not need the deductions that the AMT phases out. Their income is funneled through corporate structures, foundations, and so forth such that it is non-taxable. So, yes, they have to pay their personal income taxes according to the AMT, but that is arranged to be a small portion of the income they actually control.
The problem with the AMT is that is DOESN'T "ensure everybody pays some taxes". It skips over the middle and lower income earners. Those are the groups with all the political power, so it is especially important that those people feel the pain of government spending.
A Flat Tax with NO DEDUCTIONS and NO EXEMPTIONS, starting at the FIRST DOLLAR of income would ensure that everybody pays taxes and everybody has a vested interest in an efficient and minimal government. All the "FLAT TAX" proposals out there, including the Forbes tax, begin by exempting the first $15K or $30K of income, leaving all those people with no tax burden and therefor no reason to question the value of the government services provided.
I wouldn't actually characterize it as fair. Particularly the manner in which it handles stock options. You can be taxed on theoretical (paper) income if you are not very careful.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.