Nothing makes ordinary taxpayers madder than tales of rich people who paid nothing in income tax, said Bill Bischoff in SmartMoney. Back in the 1970s, “that anger led to the creation of something called the alternative minimum tax, which was designed to keep the rich from living tax-free.” The AMT subjects individuals with incomes above a certain level to an entirely different set of rates and deduction rules, “which are usually less generous than the regular rules.” But the AMT was never indexed to inflation, so these days the very rich aren’t the only ones stuck paying it. Each year, it catches more middle-income taxpayers, and would affect even more if Congress didn’t occasionally introduce minor emergency adjustments, as it did at the end of last year. “Most vulnerable are taxpayers with several children, interest deductions from second mortgages, capital gains, high state and local taxes, and incentive stock options.”
The AMT may ensnare as many as 4 million filers this spring, few of whom consider themselves rich, said Janice Revell in Money. Relief should be coming: The head of the House Ways and Means Committee, Rep. Charles Rangel (D-N.Y.), recently introduced the “mother of all tax reforms,” designed to permanently kill the AMT. Most upper-middle-class people, he claims, will see a cut in taxes. But some critics have dubbed Rangel’s bill the “mother of all tax hikes” because it will actually raise taxes for couples making more than $500,000 and impose a surtax on couples making $200,000 to $500,000. The law didn’t pass Congress last year, but will be on the agenda again in 2008.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
