Subject: Alternative Minimum Tax Comment: On the grounds of equity, there is still a place for the AMT if it is limited to its original purpose of ensuring that all taxpayers, i.e., those with very high tax-exempt or sheltered income, pay some minimum amount of income tax. But for this purpose, deductions which are commonly taken by ordinary taxpayers in reasonable amounts should NOT be considered tax-avoidance items that are added back for purposes of calculating the AMT. For example, state income and sales taxes should not be added back for AMT, nor should the deductions and/or exemptions for children, since taxpayers do not have children for the purpose of avoiding federal income taxes. If necessary, a 'cap' could be placed on the allowable deductions for AMT purposes, e.g. 10% of AGI for state taxes, in order to catch the truly egregious situation. These changes would exclude many middle- and upper-middle income taxpayers from the AMT effect. Of course, there would be a revenue cost, because the current administration has dishonestly assumed that the AMT as currently in effect would be collected in full in future years, thus helping to hide the cost of its massive tax cuts for the wealthy. In that case, taxes on the truly wealthy may have to rise, but that is the point: The AMT was designed to catch the wealthy, not those already paying taxes and having families. |