Speaking of Taxes...AMT

[Annie]

Read this in the dead tree edition this morning. Very long, but very enlightening. I remember hearing Bob Brinker and Neil Cavuto speaking of this 'millionaires tax' that has grown with unintended consequences...

http://www.chicagotribune.com/news/...,1,3756187.story?coll=chi-newsnationworld-hed

Is this tax trap waiting for you?
Levy snaring more of middle class poses potent political time bomb


By William Neikirk
Tribune senior correspondent

August 21, 2005

WASHINGTON -- The AMT is coming after you.

Congress passed the AMT, or alternative minimum tax, in 1969 to crack down on 155 super-rich people who had escaped paying taxes. But in the next few years, it will ensnare millions in the middle class and perhaps roil the nation's politics.

This year nearly 4 million taxpayers are being hit by the AMT, but that number will soar to 20.5million taxpayers next year and 51.3 million, or 45 percent of all taxpayers, by 2015, according to the Treasury Department.

In the process, President Bush's tax cuts will appear less generous as the AMT bite increases.

Its critics call the AMT a stealth tax increase. And it is nothing short of a political land mine, likely to spark taxpayer anger as it reaches deeper into Americans' pocketbooks. In the past, because the alternative minimum tax disallows state and local tax deductions, it hit people in the so-called blue Democratic industrial states the hardest. In the future, residents of the "red" Republican states will become increasingly subject to the AMT, tax experts said.

"It was never intended to hit middle-income people," said Sen. Charles Grassley (R-Iowa), chairman of the Senate Finance Committee. "And now it is going to devastate the middle-income taxpayers of America if we don't repeal it."

Efforts to repeal or overhaul it are under way, but not before its tentacles touch many more people. And if it is abolished, other taxes probably will have to be raised by a 10-year total of $1.2trillion to make up for the projected lost revenue, according to the president's tax reform panel.

Gobbled up in tax bite

In 2004, the AMT took in $15 billion. By 2015, the Treasury Department says it will raise $210 billion in revenue.

The AMT's reach already has expanded well beyond its original intended targets. It came after schoolteacher and church organist Kim Palermo-Bogardus of Greenport, N.Y., in 2001 when she discovered that, after filing separately from her husband, she owed an additional $584 to the Internal Revenue Service, and then another $101 in 2002.

"I was so mad when I found out I had to pay the so-called millionaires' tax," she said.

It came after 63-year-old Darla Worton of Indianapolis after she won an age discrimination settlement from Ameritech. After seeing more than 40 percent of her settlement go to regular taxes and attorneys' fees, Worton, an office worker and part-time waitress, said her accountant shocked her by saying she owed several thousand dollars more, thanks to the AMT...