April 15, 2005

"The AMT is spreading its tentacles far down the income chain."

The Milwaukee Journal Sentinel notes that the AMT hits us hard in Wisconsin.

UPDATE: And here's an op-ed in the NYT making the point I noted yesterday, that tax software makes people far less aware of the AMT and therefore much more likely to tolerate it. From the op-ed:
In a world without paid preparers and TurboTax, taxpayers would face the tedious process of calculating their taxes twice - once under the regular income tax and once using the cumbersome alternative minimum tax rules. But software does that calculation in the blink of an eye - and for taxpayers who have to pay the tax, tell them how to adjust their withholding so that next year they won't even notice that they're paying it.
Too true!

ANOTHER UPDATE: How hard did the AMT hit me? More than $6,000!

11 comments:

Frank Borger said...

Ask some of your friends what their refund was and they'll know.

Ask them how much they PAID, and they probably won't.

JB said...

I'm glad you liked that quote, I did. I think it is one of the more interesting things about the AMT, if people actually saw Tax Law take away their state tax deductions, their dependent exemptions, & the myriad of other "adjustments" the AMT makes they would scream. But they don't, they just see it as, "oh that was less refund then I expected." Then they e-file, never really knowing what the docs they sent to the IRS said. (The cycnical point of view.)

ToddG said...

So I keep reading about this largely affecting those making like $100K-500K a year, and how it's hitting hardworking, "middle-class" people unfairly. Is that income range now considered "middle-class"? Or am I reading misinformed reporting? I'd guess the "class" definitions vary by region and average income, but I wonder is there any accepted outlines of them? Because if that's middle, then I'm in lower, and I ain't living on the streets and starving, so do those people just not even count?

Also love the Madison pics, being a former (lifelong now?) Badger myself...

Mark Kaplan said...

The one phenomenon about tax software that DOES make the user aware of AMT occurs if you enter your state and local tax payments one piece at a time rather than all together. After plugging in your withheld state income tax payments you see a total refund or underpayment up in the corner. You then plug in your property tax payment, expecting your refund to increase or your amount due to decrease. You are startled when this does not happen. Then you plug in your automobile license tax. Again nothing changes. You figure that something is wrong with the software because nothing is changing. Then you recall all this talk about AMT and the insidiousness of it quickly becomes clear.

HaloJonesFan said...

Another fun bit: Pennsylvania has a statement requiring that you total the sales tax you would have paid on items purchased on-line, and include that in your tax payment.

John Thacker said...

Umm, cumbersome AMT rules? They really aren't that cumbersome. Much less cumbersome than the regular tax. A standard deduction of income excluded, then two brackets with no other deductions.

Of course, the amount paid can be heavily, but that's a different thing. But the AMT is a stealth flat tax; if everyone paid it, then many tax preparers would be out of a job.

JB said...

The AMT is certainly a flatter tax, but hardly less cumbersome. Some deductions are allowed some are not, you the taxpayer get to figure out which one as you meander through the forms. Some credits are allowed, some are not, again you get to figure it out. You get to take depreciation, but again at what rate...against you have to figure it out. You have to include more things in your income, but not everything still, and congratulations you the taxpayer get to figure it out. So yes, maybe it's flatter, but don't confuse it for a flat tax or a less cumbersome tax, cause it Ain't.

Jack Bog said...

Instead of Congress writing tax laws in a legal form of English that everyday accountants and attorneys can understand, and then having Intuit put it into computer code, why not have Congress simply pass the computer code itself? In other words, rather than say, "Your tax is your income minus these deductions, multiplied by these tables -- now go buy a private computer program to try to get it right," Congress could simply say, "Your tax is what this computer language says you owe after plugging in the income and expense information that it calls for."

Jack Bog said...

Expanded comments here. Thanks for the great grist for the blogmill.

Crazy Dan said...
This comment has been removed by a blog administrator.
Benedictus said...

My income for 2008 was less than 2007. Our deductions were basically the same amount for all of the separate deductions. Actually had less education credits. But the AMT hit me this year and not last. Is there a reason for this?