Tuesday, January 01, 2008

The IRS, the AMT, and YOU

Latest in the ongoing issue of the Alternative Minimum Tax is the latest Congressional semi-action that instead of fixing the problem merely staves off the inevitable creep of the tax as it captures more and more of the middle class.

The AMT as you may or may not know was created to do something when it was "discovered" that in 1969 about 155 very wealthy families had been able to take enough deductions t not pat any taxes. Of course, the AMT not being indexed for inflation hasn't just grabbed the "rich" but now seems to be scooping up more and more of the middle class - with 4 million people getting caught up in it in 2006.

So Congress passed some legislation late in 2007 to prevent the tax from expanding further, but that has now led to a delay in processing 3 million filler's income taxes. Mind you this just made me aware that millions of people have already filed their 2006 taxes - wow.

It is not the IRS' fault that the delay is occurring, but a Congress that doesn't really want the problem fixed and a lack of leadership (and desire) by the President to get this resolved. It would not be impossible to at least begin to fix the problem and instead of an annual band-aid, that expires and is fought over yearly, that a bill is passed to at least index the AMT to hold it where it is and prevent its expansion.

Of course, expanding the AMT gathers much more tax revenue so there's a lack of real motivation on both sides of the aisle to truly fix it rather than just mouthing platitudes about it.

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