Is the Alternative Minimum Tax Sneaking Up on Us?
Now the AMT. This latest story from CNBC: “One of the key questions lurking in the ‘fiscal cliff’ talks – though well below the public’s radar.” In fact, again, I asked Senator McConnell about it on the phone today and he didn’t know a thing about it. He said, “I’m not hearing any talk about the Alternative Minimum Tax,” but it is out there. It’s in too many places. It is on somebody’s drawing board. And one of the questions about the fiscal cliff talks is what happens to the AMT. The AMT, just to refresh your memory, was “Implemented in 1969 to make sure upper-income Americans pay their share of taxes.”
I forget what the number is, but it was so small. There were I want to say 50 exceedingly rich people who didn’t pay any income tax. And this of course was outrageous, this was unacceptable. So they came up with the Alternative Minimum Tax, made sure that everybody paid something. And what’s happened, over the years more and more middle income Americans have been caught by the AMT because it was never indexed for inflation. You were able to grow your income into being subject to it. It was an oversight, but now it raises so much money they can’t get rid of it. All the talk that they’re gonna get rid of it or modify it, they can’t. It raises too much money, precisely because it captures people it was never intended to capture. Whether it was an oversight or not, and it probably was, although that’s not guaranteed, it still is what it is today.
Now, during the 2011 tax year, for example, the higher tax hit single taxpayers with incomes as low as $48,000. Now, remember, it was originally intended to snare millionaires. Now single filers with incomes as low as $48,000 and joint filers making only $74,000 have been snared, have been caught by the AMT. “But millions more Americans could be subject to the AMT in their 2012 returns if Congress fails to reach a deal on the fiscal cliff before year-end. That’s because the AMT is currently scheduled to hit individuals making as little as $33,750 a year and joint filers making $45,000.”