A nasty surprise awaits the middle class come tax day

Seattle Post-Intelligencer ^ | January 31, 2004

[sarcasm]

Beware: The alternative minimum tax could soon snag you.

The minimum tax, enacted to make sure that even the ultra-rich pay some income taxes, may hit 44 million households, including families making less than $50,000 a year simply because they have lots of children to claim as exemptions or take other tax breaks.

The non-partisan, private Tax Policy Center estimates the tax will:

• Add an average of $3,751 annually to a tax bill, with 52 percent of affected households making $100,000 or less a year.

• Let many ultra-wealthy people off the hook again: Only 24.3 percent of people making over $1 million will pay the tax by 2010.

Congress enacted the tax in 1969 amid reports that 155 ultra-rich Americans avoided paying a penny in income tax. The alternative tax has been on the books since then, never indexed to inflation.

The tax breaks President Bush and Congress enacted since 2001 expanding child tax credits and "marriage penalty" relief make it more likely taxpayers will owe the alternative minimum tax.

Bush called for permanent extension of these tax breaks in his State of the Union address but not reform of the alternative minimum tax, which denies families most of the Bush write-offs. The 2003 tax cut contains a temporary provision that will help many families avoid the alternative minimum tax through 2004. But repealing the tax entirely would cost the Treasury $600 billion in the next 10 years.

And there's insult to the injury, the IRS says:

• Taxpayers who might owe the alternate minimum will spend 12 hours more preparing their 2003 taxes. They will have to calculate taxes under two formulas requiring eight pages of instructions, a 12-line worksheet and a 65-line form.

• And when they're done, they must pay the higher amount. Many won't owe the alternate minimum tax -- but they'll still have lost a day figuring that out.

[Trust but Verify]

Anyone who spends 12 hours preparing their household income taxes doesn't have a clue what they're doing in the first place.

[HankReardon]

I suggest the alternative minimum tax is done away with at the same time people getting MORE money in a refund than they ever paid in taxes in the first place due to tax credits is done away with also.

[leadpenny]

I'd like to see the ultra-rich and everyone pay the 12.4% FICA.
No exceptions.
Then I'd call it even.

[patton]

Are you kidding???

If you include the record keeping, it is more like hundreds of hours.

[Trust but Verify]

Yep. It's welfare. I think everybody, regardless of how 'poor' they are should have to contribute something. These EITC people also use many of the governemnt services the rest of us are paying for.

Even my teenaged kids, with part time jobs have net tax due when they submit their tax returns. If they can be expected to pay, then why are others exempt?

[Trust but Verify]

BS. Record keeping? For what? What do families under 100K have to keep track of? You collect your statements as they come in and keep them in one place. You go through the tax forms line by line and fill in the amounts. They're so simple. Use a tax program and it's even easier. Record keeping. We're not talking business returns here.

[ItisaReligionofPeace]

Makes no sense, and either a) you don't understand that social security "benefits" are capped, or b) you are a greedy socialist.

Why should someone making a million a year pay the 6% social security rate when their benefits are capped?

[ItisaReligionofPeace]

Why should anyone pay a tax on their income?

[proxy_user]

"The minimum tax, enacted to make sure that even the ultra-rich pay some income taxes, may hit 44 million households, including families making less than $50,000 a year simply because they have lots of children to claim as exemptions or take other tax breaks.

Frankly, this doesn't seem correct. If you look at the worksheet on page 38, you take your AGI and add back in state and local taxes deducted, miscellaneous expenses deducted, and medical expenses deducted up to 2.5% of your AGI. If you are a married couple, and the adjusted number is less than $58,500, you are definitely not subject to the AMT and do not have to file form 6251.

So if you're a couple with income 'less than $50,000 a year', how can you be subject to the AMT?

[HankReardon]

Here's taxes most don't even realize they are paying: The tax exspense for a business is just like any other expense, it's factored into the businesses product or service. Their tax is just passed on to their customer in the costof their product or service. When you buy something, before you even pay the sales tax, you are covering the tax for the business that prodiced the product. The serfs and peasants of the middle agers were allowed to retain more of what they produced when the land owners got there share. And we are the "Free" ones.

[patton]

How much did you spend in medical last year?

How about "unreimbursed employment expenses?"

How about "micelanious deductions?"

Now, what are the tax implications, if you put a plow blade on your pickup truck, and earn ten grand or so during a blizzard?

How do you depreciate the truck?

Is the expense of the blade a one-time deduction, or must you depreciate it?

Add in a home day-care - do you know, you are required to depreciate your house, or that at least , the IRS will treat the revenue generated from the sale as if you did?

A couple of hours my ass.

[TruthShallSetYouFree]

Let many ultra-wealthy people off the hook again: Only 24.3 percent of people making over $1 million will pay the tax by 2010.

Umm, it's the "Alternate Minimum Tax. It was enacted so that even taxpayers who were using every loophole in the book would still have to pay a substantial tax. The key is the word "alternate."

This tax is computed in a parallel manner to the regular income tax. If the regular tax, as computed, is higher than the A.M.T. the A.M.T. is not used, because it is not necessary. It is never an add-on to the regular tax, merely a substitute for a tax amount deemed "too low" based upon gross income.

Declaring that many of the ultra-wealthy are able to escape the A.M.T. is a typically liberal, class-warfare promoting statement. The fact that the A.M.T. applies to only 24.3% of the ultra-rich really means that the other 75.7% are paying taxes that are higher than the A.M.T. would be.

Here's a simple analogy. A rich brother and a poor brother go out for dinner and drinks once a week. They have agreed that the rich brother will pay for either dinner or drinks, whichever is greater. Sometimes they eat in a fancy restaurant, and only have one glass of wine. Sometimes they just have burgers, and then go to a fancy club. So, in some cases, the drinks are more than dinner, while, in most cases, dinner will be more. If we suppose that dinner costs more 75% of the time, the liberals would say that 25% of the time, the rich brother makes the poor brother buy dinner. It would be a perfectly true statement, but conveniently ignores the fact that, on those occasions, the drinks, which the rich guy is buying, were more expensive than dinner.

[Dutch Boy]

Exactly!

Taxes are hard for the majority of people because they have bought into the hype from the ads on tv from companies like H&R Block. It's just simple math and the right forms.

[HankReardon]

For a lot of wealthy people, much their wealth is from income from previous years, it has been already taxed. There is so much wealth bashing always going on. I myself am all for being wealthy! And the government having LESS money!

[leadpenny]

I understand SS. Why the name-calling?

[The Great RJ]

I prepare my taxes using a popular computer program and it still takes me probably 4 hours with only a very basic tax return. It always raises my blood pressure when I go through the questions on my tax program and see the many loopholes and special tax breaks are given out to only a few.

Why for example should someone purchasing a home in the District of Columbia be given a special tax break? Why when my daughter turned 17 in October of last year did I lose all the child care tax break that I had when she was 16?--she still lived at home and I paid all of her living expenses that year just like the year before.

[patton]

Oh, and how much gas did you put in the boat last year? You are entitled to a refund for the road-use tax, IF YOU KEPT RECORDS.

get it?

[LoudRepublicangirl]

Wealth bashing is used by the dems to get votes from those who want wealth but don't intend to work to achieve it.

[BIGZ]

FLAT TAX, FLAT TAX, FLAT TAX.

The whole tax code sucks.