Gordon Smith: Permanently Eliminate the AMT TAX

Permanently Eliminate the AMT
By Sen. Gordon Smith

Congress continues to hit the snooze button on reforming the Individual Alternative Minimum Tax. In 2004, Oregon ranked 11th in the nation in percentage of taxpayers subject to the AMT. Congress should do more than pass a temporary fix for the AMT for the 2007 tax year; they should permanently eliminate this taxpayer nightmare.

This spring, I was one of forty-four Senators pushing to permanently repeal the AMT on the floor of the U.S. Senate. Regrettably, the legislation failed to move, but I have co-sponsored other efforts to repeal the AMT. I have also co-sponsored the AMT Penalty Protection Act to shield taxpayers from penalties.

The Alternative Minimum Tax was enacted by Congress in 1969 to ensure that high-income Americans paid their fair share of taxes. The idea was that no taxpayer should avoid paying taxes by using exclusions, deductions or credits. With the creation of the AMT came a tax structure parallel to the regular income tax, but with a different definition of income, tax rates, allowable deductions, exemptions and credits. Taxpayers calculate both their regular and AMT tax liabilities, then pay the higher tax.

Initially, the AMT applied to fewer than 20,000 higher-income taxpayers. The AMT was not indexed for inflation, and as a result, an increasing number of middle-income Americans are paying AMT. Today, there are over 48,000 Oregonians paying AMT. If Congress does not take action to correct or repeal the AMT before the end of 2007, upwards of 20 million middle-income households nationwide will find themselves paying AMT. Its time for Congress to act and eliminate this expensive and unfair tax.

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Posted by at 06:32 | Posted in Measure 37 | 17 Comments |Email This Post Email This Post |Print This Post Print This Post
  • Jason W.

    Every year the AMT keeps engulfing million more Americans. It was meant to capture the richest 1% people in the country and now has been biting into the middle class. Congress needs to stop delaying and fix this.

  • Philo

    Most of the public is clueless about the Alternative Minimum Tax until they get wacked by it. Our confusing tax system puts people on the defensive, feeling that if they survive it or or it doesn’t hit them that bad everything is ok. It is not ok. The system should be designed to be clear and simple and fair. Right now it is mid-boggling, complex and based more on politics than fairness.

  • Ken

    Please tell us how, if you are going to repeal the AMT, you will make up the lost income.

    • Anonymous

      Methinks you all worry too much about lost income. The AMT is causing taxpayers to look for ways to not pay it. A knowledgeable person will simply not take the deductions allowed to them and in many cases eliminate the AMT. Example. If you have a lot of deductible employee expenses, it can throw you into AMT. Simply not taking those deductions can kee you from it in some instances.

      The AMT was intended for wealty people, not those who are trying to raise their families on wages. The AMT is hitting those people. Simply having too many children can push you into AMT. That tax is not doing as it was intended, but instead has turned into a tax increase. If something isn’t done about it, those people on minimum wage who are annually increasing their income will soon be subject to AMT. That was never the intention.

      Yes something needs to be done.

    • Steve Plunk

      The history of tax cuts is full of examples where cutting tax rates increases revenue. The AMT hurts small business owners and farmers, removing this could spur investment and increase economic activity and then tax revenues. It’s not theory, it’s fact.

      Ridding ourselves of the AMT is good for Americans.

    • Alan Grosso

      Why does the government need to make up the “lost” income of the AMT? What the government should do is downsize and live on what they take in minus the AMT. Let’s start with all the free social programs. True tax reform will never occur if we allow the government to keep current levels of income and spending.

  • Jeff

    So why didn’t you do something about this when you were part of the majority party in Congress?

  • devietro

    The AMT needs to go. Its that simple it punishes more and more individuals each year. The idea might have some merits but the current set up is wrong.

  • Anonymous

    actually, the GOP did push for massive and permanent tax reform during their time in the Congressional majority. However: from 1995-2000, they had Clinton in the White House and no ability to override a veto. In 2001, they lost the Senate when Jim Jeffords jumped ship. In 2003, after the elections gave us back a majority, Smith and others in the GOP did manage to make some progress on taxation. However, without a filibuster-proof 60 vote majority, we didn’t have the ability to be more aggressive or make anything permanent. Smith voted the right way on taxes then, so don’t blame him now.

    And… in the interest of full disclosure, I am PISSED at Smith for his uselessness on immigration and the war, two of the three most important subjects for me (the third being… TAXES). So overall, Smith gets a failing grade in my book. This post isn’t to defend him. It is merely to set the record straight on taxation.

    And… as for AMT:

    The richest don’t pay it. You have to remember, once you are rich, you have a whole new world of investment power open to you. When all your wealth is in stocks, and those stocks are going up in value, you are gaining wealth without paying taxes. Increase in stock value isn’t taxable unless you sell your stocks and pay capital gains tax. But if you have a lot of “virtual” wealth in shares of stock, you have collateral for credit. You can borrow all the money need. There are plenty of ways to turn liquid cash from credit into assets that can be sold for profit without taxation (think real estate). Then you just roll your profits back into more investments. Sure, you always have a lot of debt, but as long as your collateral is going up in value, nobody cares. When you die, your assets are liquidated and used to pay off debt, and inheritance taxes are not subject to AMT (plus, you are dead, so why would you give a crap?). If you had heirs, you could have set them up for life with non-taxable insurance plans, so your debt is irrelevant to them.

    The really rich could care less about AMT. The people who need to worry about it are the middle class who, thanks to long hours and hard work, are finally starting to make a profit.

    • DMF

      You are absolutely right about the AMT. We as taxpayers need to have our voices heard.

      With all the touchy feeley comments about helping the poor, our politicians don’t care, they care even less about the middle income.

      Until we stand up, nothing will ever change.

    • Leona Helmsly

      And you thought I was just being a bitch when I said “only the little people pay taxes.”

  • Jerry

    Oh my gosh! Without the AMT government will have to do something to get that money back! The sky is falling. Whatever can we do?
    These tax and spend simpletons just need to send their own money into Washington to make sure we don’t run out.
    Problem solved.

  • Jerry

    Maybe we could amend the law so that the AMT applies only to illegal aliens.
    How about that?

  • Howard

    How about we all get behind the Fair Tax act ? It’s been siting in the wings since 2005, way too long. House Bill 25, Senate Bill 25. Let your representative know now. See fairtax.org for details

  • Anonymous

    the only truly “fair” form of tax would be a system of “rent” where all residents, regardless of who they are or how much money they have, all pay the same dollar amount for the privilege of being here. this would apply to aliens as well as citizens, and you would be an “illegal” alien if you didn’t pay up. just like a tenant who doesn’t pay the rent, and alien who doesn’t pay up should be kicked out. citizens who don’t pay should have the opportunity to work it off with community service, or to renounce citizenship and be escorted to any embassy that will take them in (if no embassy will take them in, then say hello to forced labor camp).

    How much to pay? Simple. Every four years, the newly elected President should begin his term by proposing a budget. Congress would then ratify that budget (after making whatever improvements they and the President can agree on). Take the total amount. Divide by population. Everyone pays that. If the gummint doesn’t take the money in, they can’t spend it. If an emergency arises, cut spending somewhere else. Budget extra in anticipation of emergency, and that money stays in a savings unless there is an emergency. Roll over what isn’t spent to the next cycle, so that there is less need to budget for emergencies next time around.

    After four years of fixed rent and a government that has to work on a real budget, the people vote. If the President and Congress have done poorly, vote in people who will spend less and more efficiently.

    Eliminate all other forms of federal taxation (including regulatory fees), and watch the economy prosper. Costs will go way down. Even the very poor will have no real burden making their rent payments as prices for things like food and electricity and gasoline drop down to levels from around 1950. And if you are truly poor (as in, you have no job and no income), you can earn your rent credit through community service (if you are unemployed, it’s not like you have better things to do with your time).

    Got kids? You pay their rent until they 18. Can’t afford them? DON’T HAVE THEM. If you pop out 9 kids and can’t pay their bills, we will be happy to transfer them over to adoptive parents who can. No more welfare subsidies for overly reproductive crack whores!

    And best of all, no one can ever complain that someone else isn’t paying their “fair share.”

    • Howard

      The Fair Tax repeals the 16th amendment, and stops all withholding on wages. No income tax, SSI, Medicare or disability will come out of the paycheck. Everyone will get everything they’ve earned. That will reduce the cost of everything by 22 percent (the included “hidden” taxes) and replace it with a one time sales tax (23%) on new items only. SO the cost of everything initially will stay about the same. The government will also give a monthly payment to cover the sales tax on essential items. But you get all your paycheck, so you will seem to have a pay raise, and you will be able to save money now
      With this consumption tax, the government still gets the same amount of money, and our economy will grow rapidly because there are no longer any attacks on a companies profits, adn no intrusive IRS to deal with.
      Go to the website Fairtax.ord, and read about it. Or buy the book, but don’t go off half cocked. This plan has been thought about for decades, and the bugs are worked out

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