Yay! $$$ for meeeee!!!!!
ADDED: Those damned Republicans only want to help the super-rich, while the Democrats' beneficence concentrates on the humble folk in the $100,000 to $500,000 range. Finally, someone's looking out for the working man.
AND: Please, nobody read this mockery to mean that they shouldn't eliminate the AMT. I really want them to do it. How they're going to replace all the money they lose, I don't know. And let me just add that the reason the AMT hurts me so much is that the income and property taxes in my state are so high. Those are the big tax deductions I lose the benefit of. What the AMT does -- certainly in my case -- is to make sure that people who suffer from a really high state and local tax burden still pay their share of federal taxes. Getting rid of the AMT makes it easier for state and local government to maintain high taxes because these taxes will lower our federal taxes. Anyone in a state with low taxes should probably be pissed off at this, because their states do with less revenue while their citizens fork over more to the feds. But presumably those states vote Republican, so who cares? My state votes Democratic, and it's got a lot of people who could really save a lot -- and contribute generously to the Democrats who have tended to us so well. In short: $$$$$$$$$$$$$!
SPECIFICALLY: Last year, the AMT cost me $4900.
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This is funny. When I got a tax break from Bush, I was a member of the wealthy class. But we don't make enough (yet) to have the AMT effect us, so now we're not even middle class any more. The Dems take over and suddenly I'm poor! I guess the really are in favor of the redistribution of wealth.
I actually don't mind that the AMT is going to be ammended, as it does need to be fixed from time to time to avoid the dreaded 'bracket creep'. But selling this as a middle income tax break while selling Bush's tax cuts as solely for the rich is an astounding act of total bullsh!t.
Anyway, Ann, enjoy your tax break!
If the new congress is willing to so some bipartisanship with the president by getting rid of these horrible taxes, I think things may go okay for a bit.
The question is what do they want to replace the money, seeing as they are now the budget hawks? Or am I being unnecessarily cynical?
I'm not even in the $100K range (yet) and I saw my taxes drop ~20 percent thanks to the Bush Tax cuts for the Rich. The fact that those who weren't rich were not positively impacted was just another line of crap foisted on America by the Democrats.
As for the AMT I thought it was part of the long term Republican plan to get rid of it. It needs to go.
That sounds like a very smart political move to me. One long overdue and something the GOP dithered about during their 6 years of combined executive & legislative control.
"Those are the big tax deductions I lose the benefit of."
There should be no federal tax deductions for local taxes. Nor should there be deductions for mortgage interest. These are wealth transfer payments from one part of the country to another. In effect, I am subsidizing overpriced (housing-wise), overtaxed parts of the country.
I make a good income. I live in a good house. Yet I live in a state that has no income tax, and since houses are affordable here I don't get to write of the mortgage interest. Why should I subsidize you up in Wisconsin, a guy who has a second home, or some jackass in Orange County who pays $600,000 for a cookie-cutter tract house?
Lou: Because there are more of them than there are those like you, and they vote ;-) That's how it works.
The budget problem is always related to the spending side.Tax revenues have grown at record rates since 2003.The democrats never saw a vote buying opportunity they would pass up and remain the party of transferring wealth from the producers to the consumers. The republicans have grown equally adept at buying votes. We are left holding the bag.
Lou,
You have a tax equity case on the deductibility of mortgage interest, esp. if you want a nation of renters as tenants of a few landlords rather than a nation of homeowners; but less so on the deductibility of local taxes, as slocum pointed out.
As a conservative, deductibility of local taxes ticks me off only to the degree it provides some cover for the state and local to jack up my state income and property taxes, since, after all, its deductible from federal income tax...
Otherwise, it helps to ease the pain until you run into the ATM buzzsaw, which was nothing more than the redistributionists' (i.e., the Dems) fail safe mechanism for getting their hands on the money, no matter how many legitimate deductions and credits you might have earned. Bush and the Reps didn't fix it for the unsurprising fact most of the ATM burden falls on blue state voters/taxpayers (and the revenue hit is significant). But with bracket creep, even middle-class taxpayers are getting trapped by the ATM, so even the Dems are now compelled to act - but they'll find a way to raise another tax to "pay" for this tax cut. Count on it.
They're all asses.
How they're going to replace all the money they lose, I don't know.
Well, the Child Tax Credit is scheduled to expire and Charley Rangel has said that there is no Bush tax cut that should be extended.
hayek: Would you care to rephrase your next to last sentence? I don't argue with "adept" but I have serious questions about just how "quietly" they have acted.
Ann, as someone who worked in New York City, you should realize that $100,000 really doesn't go far in Manhattan and people who earn that (which includes NYC public school teachers) are not "rich".
I am a 3L law school student and I know plenty of people who are 1 and 2 years out of law school that earn $145,000, have tons of law school debt, work ridiculous hourts and for that they get to live in cramped studios.
While they currently do not have to pay the AMT, those are the types of people that you call rich that end up getting hurt in a few years.
Honestly, I'd get rid of the regular tax system before the AMT. All those deductions just make the tax code more complicated and inefficient. But some of them are popular.
You could reasonably argue that money that is taken by state and local taxes isn't really income at all -- we've never seen that money and shouldn't pay federal taxes on it.
You can also more reasonable (IMO) argue that since the spending (and presumably benefits) stays within your state and local government, then it's unfair and selfish to be able to reduce the amount of money paid to federal government and to the rest of the union by raising local taxes. It's a way for wealthy states to keep more of their money at home, rather than being redistributed to poorer states. (Of course, then the standard comeback has to do with different levels of cost of living.)
As a CPA, I would love to see the tax system be as complex as it can be, but the AMT really is hitting more and more of my clients. Some of them are fairly well off, and some of them are moderately well off.
I have to agree with Lou, these deductions do subsidize high tax states and high mortgagers. If we get rid of the deduction, then mortgage companies will end up lowering their rates out of necessity. The mortgage deduction doesn't even necessarily help some homeowners. The standard deduction for a married couple is much higher than it used to be(with the elimination of the marriage penalty), so there are homeowners who don't itemize.
"I am a 3L law school student and I know plenty of people who are 1 and 2 years out of law school that earn $145,000, have tons of law school debt, work ridiculous hourts and for that they get to live in cramped studios."
Is someone holding a gun to your heads and making ya live there? Oh, the humanity!!! ;-)
The $145k almost entry level legal jobs are there and in other obnoxiously priced parts of the country, and that is where you are most likely to make a million or so as a partner.
But, realistically, I would think that in many cases it would provide for a much better quality of life to take a $100k job in a city with a cost of housing 1/3 that of NYC, even without the tax ramifications.
But there has been a lot of hypocracy from the Democrats in their pretense of representing the poor for a long time now. I remember a survey of the Senate a couple of years ago, showing that there were more Democratic millionaires and more aggregated wealth on the Democratic side of the isle than on the Republican side. And that was before the Heinz fortune shifted sides, with John Kerry now being considered the richest Senator.
And the new Democratic leadership? My memory is that Pelosi's husband is in the $50-60 million range, and Dirty Harry Reid has made a couple of million in highly questionable financial dealings (and his 4 sons have done well to as a result of his Senate clout).
The cynicism is that these ultra rich Congressional Democrats and their financial backers have the money to hire the best tax attorneys and clients to avoid most of the taxes that they are so insistent on imposing.
Of course, the AMT was passed to hit just that sort of hidden income - it just never worked that way. Instead, it hits people like Ann, who presumably doesn't consider herself wealthy.
The 'economic choices of a law student' is a separate post. Could probably intertwine it with that wack-job mother.
"How they're going to replace all the money they lose, I don't know."
By open immigration, which increases consumer demand and spending and t/4 tax revenue. If states like WI really wanted to grow, they would lower their taxes. Everyone I know who wants to move back is stopped by the high taxes, which cancel out any savings from lower home prices.
Hey, Icepick, don't worry! I think there's some free government cheese in this deal for all of us, the new poor. :) And Lou--the jackass in OC probably has a higher income than you (or he couldn't afford the house) so is paying more in income tax than you.
But the GOP has wanted to do this in conjunction with making the Bush cuts permanent -- only to be blocked by Democrats.
How can the Dems now complained that these "poor" taxpayers making "only" $100,000 to $500,000 need to have their taxes cut in order to get the "benefit" of the Bush "tax cut for the wealthy"?
Or maybe I should ask how they can do it with a straight face and a shred of integrity.
One thing no one can argue with, and that is that the tax code is irredeemably screwed up. Is irredeemably a word? If it's not, that makes it even more appropriate.
I resent the fact that I have to shell out money and I don't even understand the rules that determine the amounts I pay out. Especially since I've gone freelance, it becomes more obvious all the time what a burden it truly is.
I am all for a flat tax, or even better, the Fair Tax. Pipe dreams both, I'm sure.
Shorter Althouse Commenters:
Shit! Middle class tax relief from our new Democratic overlords?
I am all in favor of AMT reform. Here is what is propose: Reduce the AMT to 15%. Apply it to everybody. This is the only tax you pay -- no need to calculate an alternative and pay the higher of the two.
Why not?
So, per George Mahal, the new poor are those who make less than 100K? Kewl!! The country must have done much better under the Repubs than I had guessed. Who knew that a Lefty like George would have been the first to mention it.
Personally, I don't get hit by the AMT and I feel wealthy, compared to a few years ago. I live in a house that we can pay for from either of our jobs alone, 6 months worth of ordinary bill payments in a MM account, decent retirement plans, 6+ months of good food in storage and rotated through my meals, good health. How can I not consider myself wealthy?
But, per George, I am among the poor, now. I sure hope I'm among the deserving poor so that George and his friends will be willing to pay more taxes to give me some goodies.
I agree with Gerry, end the AMT (unless we turn it into a true flat tax at around 15%) and end the deduction of local/state taxes. Local officials should be held responsible for their taxes. The current deductions protect those officials and allow voters to continue to vote for those idiots.
JorgXMcKie -
Where did I identify the "poor" as people making 100k /year? Incomes have been going up since this was enacted 35 yrs ago.
Professor Mankiw, the ridiculously smart free market economist has an interesting post on the matter.
http://gregmankiw.blogspot.com/
As for other people's comments to my previous post, you are correct that no one forces anyone to live anywhere, my point was that $100,000 doesn't provide for a rich lifestyle for many people. This is true for people in New York, Chicago, LA, and many other cities around the country and is especially true for young and recent graduates of law, business, and medical schools.
Yes, get rid of the AMT.
No, do not replace the money.
JUST eliminate the tax.
Cut spending. Cut, cut, cut!
Ann, you are wrong about this being unfair to the low-tax states.
The low-tax states almost all get way more back in revenue than they send to the federal government. The high tax states almost all get less back.
Thus, New York has been subsidizing lazy states like Mississippi since the implementation of the income tax. It is completely unfair. Why should the intelligent, productive workers of a state like New York have to subsidize the people of Mississippi who sit on their lazy ass all day? It goes against everything capitalism stands for.
In fact, why should I have to subsidize anyone at all? There shouldn't be a graduated income tax. If the cost of running the federal government comes to $10,000 per person a year, then everyone should pay $10,000 in taxes. Even if you make a billion, or if you make zero.
How they're going to replace all the money they lose, I don't know
Don't be silly. We all know that cutting taxes raises more revenue not less. And regardless, deficits don't matter.
Time for some blue state tax cuts.
And here's how the Democratic Congress will cut spending. They will slash spending to the Red states.
For an example of welfare for the red states check out this article:
"Only five blue states are net recipients of federal subsidies; only two red states are net payers of federal taxes."
"In 2003, the top subsidy-sucking state, in percentage terms, was red-lite New Mexico, which received $1.99 in federal money for every dollar it sent to Washington, D.C. All the next eight net recipients of federal spending were redder yet: Kentucky, Virginia, Montana, Alabama, North Dakota, West Virginia, Mississippi and Alaska, which received $1.60 to $1.89 back for each tax dollar.
The list of net losers in the state-federal exchange, by contrast, reads like a Who's Who of Blue. Two of the top 14 were traditionally red Western states that are starting to turn purple, Colorado and Nevada. The other 12 are all blue: California, Connecticut, Delaware, Illinois, Massachusetts, Michigan, Minnesota, New Hampshire, New York, Washington, Wisconsin and the biggest chump of all, New Jersey, where the federal government spends just $.57 for every dollar it collects. Clearly Tony Soprano did not negotiate this deal."
http://seattlepi.nwsource.com/opinion/211080_sciglianomoney.html
The red staters are the ones who are STEALING my paycheck. That's completely unfair. I hope to see the Democratic Congress correct this in the name of fairness. Should be pretty easy since there are hardly any Democrats left in the South. Most of these stupid laws were probably created to accomodate Southern Democrats in the 60's.
George Mahal:
"Shorter Althouse Commenters:
Shit! Middle class tax relief from our new Democratic overlords?"
Well, if middle class is $100,000 to $500,000 [that's who's getting the tax relief being discussed here] then the rich must be those earning above 500K and the poor must be those earning less than 100K, no?
;->=
I guess I just find the idea that earnings of between 100K and 500K (which the census bureau identifies as being in the top 10% of income earners} puts one in the 'middle class' as just this side of ludicrous.
If the MEDIAN family income in the US is around 47K, how in the world can 100K to 500K be middle class?
Since some people still seem confused by my previous posts let me be clear: $100,000 and even 200,000 do not allow one to live well in New York City or in numerous other cities. There is a cost of living adjustment.
Furthermore, many of these people who make $100,000 have graduate school debt in excess in many cases of $60,000.
So for purposes of claiming that someone who earns $100,000 is in anyway wealthy, is inaccurate. Someone who earns $100,000 in Wisconsin might be able to afford what one characterizes as an upper-middle class lifestyle: a large house and nice cars, in many of the placs where the AMT hits it allows you to rent a studio apartment in a six floor walk-up.
As for the previous comments made by Dick that you can live well in other cities like Miami, that presumes that you can get the same paying or similar paying job in another city.
Furthermore, as mentioned above it is irrelevant whether you can move elsewhere, we were discussing whether a $100,000 makes you wealthy, which in my opinion if you live in one of the aforementioned cities it doesn't and therefore I don't see the AMT in at least cases where it is limited to $100,000 or $200,000 as a tax cut for the "wealthy". However, as Professor Mankiw points out there are possible other problems in terms of fairness with it.
Man, you New Yorkers are hilarious!!!
I would have no problem living well in NYC on 100k per year. The trick is to understand the difference between "living well" and "living like an idiot."
As far as your 60k graduate student loans, cry me a river! Nobody forced you to spend that money. You spent it as an investment in future income (unless you spent it on a PhD in English literature, in which case you deserve to pay the stupid tax.)
You could have taken an ROTC scholarship, gone to a state school, or simply entered the work force, saved, and paid cash for the education.
If you completed the degree, the extra income offsets student loan payments. And there are already a number of federal tax breaks designed to help offset education costs. The interest on your loans is already indirectly subsidized by federal guarantees.
Lastly, don't bitch about living in inflated wage environments. People with high debt loads SHOULD work in inflated wage environments. You can spend your loan money with Wisconsin dollars and then pay it back in tiny New York City dollars. It's a steal!!!!
New York academics have got to be the worst! All the snootiness and twice the sense of entitlement!
You live in the greatest city in the world outside of Waimanalo, HI. There's a value to that, and a price tag. Pay it and enjoy it. But don't bitch when other people balk at subsidizing you.
Believe me. I feel your pain.
Now shut the f*ck up.
:)
mockmock - you entirely missed the point.
A lot of students from private schools, or out-of-state students at public schools, face a similar problem. Living in cities like New York and LA is expensive to begin with, but its doable -- after all, almost ten million people live there. However, people with student loans who rent their living space are put in a tough situation. If you've got $1250 a month in loans, you need to earn almost $30,000 per year just to pay off your loans. That's a lot of money, and it makes it almost impossible to take anything other than the very demanding big-firm jobs.
Or, you can get a job in a city like Buffalo, New York (my hometown) or Green Bay or something, and try to pay off those loans on your small-market starting salary, which can literally be less than half of your starting salary in a big city. There are plenty of firms in Buffalo and Green Bay that start new attorneys at $60,000 or $65,000, whereas you can earn $145,000 in your first year in New York. The higher standard of living in New York City evens out some of that difference, but the higher salary and local taxes expose you to big hits from the AMT.
Jason,
Surely, you're kidding. $60,000 for student loans? I've got $120,000, and those are only law school loans. I'm fortunate enough not to have any loans left over from undergrad.
Do you think its easy to just "enter the workforce and save" the money? How long would it take you, with nothing more than a BA or BS degree, to save up $120,000 for law school, or $160,000 for medical school?
But I guess you have all the answers! Please enlighten me, what other career advice could you share?
I used 60,000 because that was the figure someone above me used. The dollar figure does not matter a whit, however.
Nobody forced you to take on 120,000 in law school loans. That was your decision. You wanted to be a lawyer and pay inflated prices to get a prestigious name on your diploma.
You pay that cost out of future earnings. If you can't, well, then that wasn't a very smart investment, was it?
Jason,
You need to learn to read more closely. You're just ranting against lawyers because they earn more money than you, instead of addressing my point.
This is all about the AMT. If you want a good job in the fields of law or business, you have to go where the jobs are. A lot of those good jobs are in states like New York, California, and Massachusetts, which have high state and local taxes. Law school is expensive, that's all there is to it, and that's fine, because its still a good investment. Having said that, the AMT was intended to keep high-earning citizens from taking so many exemptions that they pay very little -- or, in some cases, zero -- taxes to the federal government.
Since it hasn't been adjusted since it was implemented, it now effects debt-burdened recent graduates with working-to-middle class standards of living, because they earn a salary which, thirty years ago, would have made them wealthy. The AMT was never intended to effect 28 year old renters with a lot of student loans, but since the tax has not kept up with salary and cost-of-living inflation, that's what's happening.
Sure, we could have "chosen" not to go to law school, but if that's your argument, then you can say that our soldiers wouldn't have to worry about having inadequate resources if they had chosen not to enlist, or that Republicans wouldn't have to worry about the future of their party if they only chose not to be involved in politics. Take your reverse-snobbery class warfare somewhere else, because nobody else is buying it.
Oh but this congress may be not now as it is all new government now.
New York Drug Rehab
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