Subject: Alternative Minimum Tax Comment: Please do your best to eliminate the AMT, or at least to fix it so it no longer impacts taxpayers like us -- of moderate income who have rarely occurring substantial capital gains. Possible fixes include: allowing full standard or itemized deductions; allowing full personal exemptions; exluding long-term capital gains from AMT income; and substantially raising (and inflation indexing) the AMT exemption. We are retired and have moderate income normally. This year, for the second time in the last ten years, we were subject to the AMT! Its original purpose was to ensure that very high income people pay some tax, if they were using loophole(s) to avoid most or all of their regular tax. It has been reported in the press that it no longer effectively serves that purpose, presumably because these people have found new tax avoidance schemes not covered by the AMT. Plugging these new loopholes may help enable revenue-neutrality for the fixes suggested previously. We were not users of these loopholes. Because of planned sales during retirement of properties held many years, we had substantial, very long-term capital gains that triggered the AMT in both the years we were subject to it. This year its effects were: (1) to strip us of our personal exemptions and our deduction for taxes paid, and (2) to raise our tax rate from the normal graduated set of rates, topping out at 25% for us, to a flat rate of apparently 26%. Actually, since we were subject to the phase-out of the AMT exemption, we had an additional 25% of AMT-taxable income for each dollar of Adjusted Gross Income within the range of the phase-out, making our effective tax rate in that range 25% higher, or 32.5%. (If all this sounds hopelessly complicated -- that's because it is that way becuase the AMT rules are hopelessly complicated -- a good reason for doing away with it altogether!) The impact of the AMT on people of much higher income would be LESS. as their personal exemptions would have been phased out under the regular tax system anyway; they would suffer less or no increse in tax raters because of already being in the 28, 33, or 35% tax brackets; and they would be above the range of the AMT exemption phase-out. Sincerely, Peter M Lang, PO Box 2917, Jackson WY 83001 |