But we need more than just a “patch”. We need to eliminate the AMT from the tax code. Here’s why:
The Alternative Minimum Tax (“AMT”) presents hardships to the practitioner as well as the taxpayer who prepares his own return by, as its name implies, imposing a second tax calculation mechanism on taxpayers. It serves virtually no useful purpose, other than the raising of an ever-increasing amount of tax revenue. But it has become very clear in recent years that this AMT tax revenue is not coming from just the taxpayers who were the intended targets of this tax.
A very substantial majority of all AMT paid by taxpayers results from the following four factors:
- Treating state and local taxes as a preference
- Treating miscellaneous deductions as a preference
- Allowing lower exemptions than the regular tax.
Each of these, however, can be quickly shown as inappropriate factors with which to base a tax system intended to just make sure everyone pays a “fair share” of tax.
- State and local taxes are hardly a loophole. The taxes exacted by state and local governments are hardly “voluntarily” paid by taxpayers in an attempt to avoid paying federal taxes.
- Miscellaneous deductions is the category of deductions that consists primarily of expenses incurred to earn income that is subject to tax. It includes unreimbursed employee expenses, investment expenses, etc. This is the most basic and important deduction needed to have a truly fair income tax system. For example, if an individual pays a lawyer a fee for collecting back wages, the legal fee is a miscellaneous deduction. If an individual pays the lawyer $300 for collecting $1000 of back pay, netting $700, the AMT would tax the individual on the full $1000.
- The exemption available under the AMT tax system is a fixed dollar amount which, unlike exemptions and standard deductions under the regular tax system, is not indexed for inflation. Furthermore, it is phased out entirely over certain income levels. And each year Congress has to approve an annual “patch”, which raises the threshold for inflation, in order to raise the exemption limits of the tax so that less wealthy taxpayers won’t be subject to the AMT.
It must be noted that the annual AMT patch is not a tax cut at all, but merely the avoidance of a massive tax increase on millions of middle-income taxpayers’ families. Congress likes to point to the patch as some major revenue loss, had the AMT been applied to those families, as an excuse to raise to raise taxes in order to offset this “potential missing tax revenue”.
The AMT in its present form has no place in tax law. The AMT does not serve the purpose for which it was intended and functions in a most inequitable manner while adding enormous compliance burdens. It should therefore be changed to eliminate the adjustments for state and local taxes and miscellaneous deductions, update its rates, and modify its exemption — or else the AMT needs to be eliminated completely.
crossposted at redstate.com/alanjoelny
by | ECONOMY, FREEDOM, OBAMA, POLITICS, TAXES
This is fairly self-explanatory
Obama’s plan to tax the rich would have very little impact on the crushing debt — even if you were to tax the top income-earners at 100%…but he doesn’t want to tell you that.
by | ECONOMY, OBAMA, POLITICS, TAXES
In an interview a week before Election Day, President Obama declared that if he won again, it would be mandate for making cuts, but also for raising taxes on the highest income earners.
Reviewing Election Day exit poll data, however, tells a different story.
Looking at the voting patterns broken down by income earning amounts (based on 2011 total family income), there are only TWO categories out of six that Obama won more than 50% of the vote. Those are:
Under $30,000: Obama 63% Romney 35%
$30,000 – $49,999: Obama 57% Romney 42%
The other four out of the six categories had Romney with over 50% of the vote. Those are:
$50,000 – $99,999: Obama 46% Romney 52%
$100,000 – $199,999: Obama 44% Romney 54%
$200,000 – $249,999: Obama 47% Romney 52%
$250,000 or more: Obama 42% Romney 55%
The electorate that voted from Obama – voters whose households earned under $50,000 – are also the same citizens who pay the least amount of taxes. The voters who already pay the most in taxes voted for Romney.
The only “mandate to raise taxes”, therefore, comes from the population of taxpayers who prefer others to pay more in tax so they can continue to pay less. The only clear lesson from the election is that President Obama has created class warfare as it has never been seen before.
(crossposted at redstate.com/alanjoelny)
by | ECONOMY, FREEDOM, OBAMA, OBAMACARE, POLITICS, TAXES
I was talking to a small business owner the other day. He said it made more sense to “to pay a $2,000 fine than buy $6,000 insurance policy” (per employee, of course).
But there is no “fine”. It’s a “tax”. Employers who do not provide the one-size-fits-all, government-approved insurance demanded by Obamacare are taxed. And we know it’s a tax because the Supreme Court said so–in fact, if it isn’t a tax, if there is any hint that not purchasing insurance was bad behavior, Obamacare is unconstitutional.
Conservatives, people of integrity should take care to describe this payment to the government accurately: it is a tax on perfectly legal and moral behavior, not a fine for bad behavior. When you hear someone refer to the payment as a fine or hear them denigrate a business who opts to pay the tax rather than purchase insurance, be sure to remind them what the Supreme Court said.
by | ARTICLES, ECONOMY, OBAMA, OBAMACARE, TAXES
I’ve written several articles regarding the folly of Obamacare. This morning, I read a great piece on the need to keep ObamaCare and its impact at the forefront of our discussions .
The full implementation of the Affordable Care Act needs to be a major discussion in the coming months and years, especially in 2014 when every Democratic senator elected in 2008 on the coat-tails of Barack Obama may be branded as the deciding vote to corporatize — with government sanction and force — the mandatory use of seventeen hundredths of private property.
and this:
No, we cannot forget about Obamacare. When our expectation is to have the finest product available, at the expense of another person’s property; and when life is that product, it is impossible — by the laws of economics and the laws of logic — for our nation ever to maintain its prosperity. We will create a stagnant mediocrity, grant to a faceless human authority the power to determine how much life and quality of life is “acceptable,” and elevate our dependence on that authority until property is void, liberty is nostalgia, and self-propriety — i.e., life — is nothing more than a pluralistic determination of worth.
I urge you to read the article in its entirety.
by | CONSTITUTION, ECONOMY, FREEDOM, OBAMA, POLITICS, TAXES
Class warfare proved to be the winner in this election cycle as it was a key component of Obama’s policies and re-election rhetoric. The components of such a tactic were easily recognized: 1) the political opponent (Romney) will hurt those among us who are most vulnerable (elderly, poor, etc); 2) the political opponent (Romney) does not care about the “middle class”; 3) the political opponent (Romney) wants to benefit those most advantaged (the rich/elite).
The third point of this strategy was the one that resonated most with Obama supporters; he continuously and intentionally railed against “millionaires and billionaires”, and talked about “the wealthy paying their fair share” in order to create a divide and separate that particular fiscal population from the rest of “mainstream America”.
Besides the obvious baseness of such an argument coming from the President of the United States, it is critically important to note the amount of true millionaires and billionaires are so few in number, that taxing them more – as Obama plans to do – will not help with any significant deficit reduction. His assertion was pure dishonest political speech; you cannot possibly create enough revenue from the millionaire/billionaire population even if you were to tax them at 100%. Our fiscal situation is so dire in this country that an increased tax on this group in any large or small amount solves nothing in the long-term.
Unfortunately, none of this mattered to Obama. He intentionally threw the labels around so that they conveniently fit whatever emotive language would coerce voters and supporters to rally behind his outrageous monetary policies. It was classical class-warfare: antagonizing lower socio-economic groups against the “rich”. Simultaneously, he added record numbers of citizens to entitlement rolls, thereby creating a further divide. And it worked to win.
Obama has stated his intent to raise the marginal rates on the top income earners, (aka the “rich”, “wealthy”, or “top 2%”). Yet history shows us that higher tax rates results in less – not more – tax collections. Democrats like to wax poetic about the high rates of 70% and even 91%. What they fail to comprehend or deliberately don’t explain is that at those times, there were an enormous amount of tax shelters such as real estate, so that people could legally lower that taxable income and would not have to actually pay the outrageous tax rates.
With the IRC reforms of 1986, Reagan reduced the tax rates to 28% in exchange for getting rid of the tax shelters. As a result, the amount of federal income collected was more at 28% and a clean tax code than at 91% and tax shelters, because at 28%, it really wasn’t worth the time, cost, and effort to hide money. We need comprehensive tax reform, but not the type that Obama is pushing. His policies of more “tax credits” (which is government spending run through the tax code) and marginal rate increases hampers our recovery. If the federal tax rates are going to rise again – and they will – in addition to state and local tax hikes, the tax burden in this country will be staggering. People will do one of two things: 1) start finding ways not to pay it like they did when the rates were outrageous or 2) stop working and investing so much because it’s just going to get taken away from them. When that happens, the economy worsens — and it is already suffering enough.
Blindly vilifying the rich was simply a tactic Obama used to pit classes against one another for political gain. But putting it into practice? Imposing higher taxes on that segment of the population most able to invest in and aid our recovery is true economic ignorance. Why take additional money from those taxpayers who have been able to create wealth and employment successfully and give it to the government and politicians who have proven their ability to mismanage and squander income? What worked to win the White House, will not work to win the economy back.
(crossposted at redstate.com/alanjoelny)
