Dire new Tax news...

Welcome to PriusChat! My, you certainly jumped right in. Must be a former lurker.

Congress has been dragging its feet on the AMT matter since fall. Now, with the collective mood having shifted to "let's go through the motions, at least, of saving money where we can" (due to everyone in the House being up for re-election, and 1/3 of the Senate), who knows what they'll do?

 

Oops! The anticipated credit was a factor in our decision to buy a Prius, though not the principal reason. (The car is great!) Though we have not yet been subject to the AMT, it looks like we could be with the lapse of the previous AMT relief in 2005, or at very least, have the credit severely reduced from what we anticipated.

This is disturbing information, at best. I guess we will just have to write our representatives and wait and see what happens.

 

The AMT is GREAT! If we leave it alone within a few years we will effectively have a flat tax with no deductions and credits. This would be much more equitable than the current system. Right now you can have two tax payers with identical incomes that pay hugely different tax bills. Why should you pay less taxes because you have a huge mortgage than someone that owns their home outright? There are many many other things wrong with the current tax laws. The best thing do to would be to trash the entire system and replace it with a simple system that is the same for everyone. Plus that would put most accountants and lawyers out of work, an added benefit!

 

OP, thanks for posting this article. I am hopeful that the Senate extension will prevail and raise the AMT exemption. Otherwise, my wallet is getting lighter after losing out on my state's tax credit.

 

Riiiiight

You know when the AMT was put in place, there were only a handful of people making over $100K a year in the country. It's intent was to make sure they didn't get off without paying any taxes.

Of course, the first thing they did was figure out how to get around it.

Currently, do you really think the people with Million Dollar incomes think about the AMT at all? Of course not. If they were paying it, it would have been gone a long time ago. They just ignore it and their accountants wiggle around it.

The only people caught by it are the true middle class, who get absolutely screwed, and wind up paying a tax rate that is twice what anyone else in the country pays.

If you don't like the Mortgage Deduction get it removed, but don't pretend to yourself or anyone else that the AMT has anything to do with fairness.

If you want a Flat Tax get one put in, but don't pretend that the AMT will flatten anything except average people.

You're up on the soapbox ranting to the 'masses' about tax fairness, and the rich are rolling on the floor laughing at you, watching the struggling middle class spend energy calling each other names and pretending they have a moral point.

Kind of sad, really.

 

What is AMT? Forgive me, but I am only a peasant and don't know what it means.

 

AMT= Alternative Minimum Tax and was originally designed to make high income earners pay at least a MINIMUM tax, as they were making the most and paying nothing. Unfortunately, the incomes taxed were not adjusted for inflation so as incomes creepd up more and more "peasants" are now stuck paying into it. Just one more underhanded way to make more pay more tax without actually raising taxes, just like eliminating deductions thereby making more pay tax without 'raising' taxes. These days if it is underhanded and slimy it is a government sidestep of the political process which was put in place for a reason.

 

Nope you are wrong. AMT is around 25-28% - which makes it just about a flat tax. There should be no such thing as deductions, credits or exemptions to any tax. Those are all items that complicate the system to favor special interests. If there was a flat tax the super rich would pay more tax than you can imagine. Just think if they got not exemption or deductions and actually paid 25% of what they got as income?

 

If we had a flat tax based on gross income and no person or entity excluded (including churches, non-profits, corporations, etc) I am willing to bet the tax rate would be sufficent at less than 5%. Of course, it would be grossly unfair as the wage earner would 'get away' with murder whereas self-employed people like building contractors would get killed as over half of their gross income is for materials, and not profit. none-the-less it's all a pipe dream as money talks (lobbyests) and 'po folks pays.

 

You really don't have much of a clue do you.

The AMT is 'just about' a flat tax.

Wow.

If there was a flat tax, then yes, the rich would pay more, but that is far from what happens with the AMT.

As I said, if you want a flat tax, pass the law for it, but pretending that the AMT has any effect like a true flat tax, or that it affects wealthy people at all is just mind boggling.

Of course, unless you're very wealthy. Then I can completely understand your wanting to keep up that fiction.

 

The AMT is not a flat tax! Without the ordinary tax, people who make under the exemption limit basically pay no tax. And there're still a lot of preference items to keep the rich away from the AMT.

If you want a flat tax, then put in a real flat tax. The AMT isn't it.

(Not that I'm using it now, but I do have an accounting degree. And I'm pretty sure kirbinster needs to understand more about the AMT.)

 

Kirbinster understands the AMT very well and has been paying it for years. Kirbinster simply believes that everyone should pay tax and at the same rate and that the government should not reward people for having 12 kids or buying a house that they could not otherwise afford. Kirbinster also thinks that the government budget should be frozen and no increases should be allowed beyond the rate of inflation and incremental tax moneys should reduce the deficit and that the tax code not be used by special interest groups to forward their social policies.

 

The basic income tax is (slightly) progressive: if you make less than $7,300 and you are single, you pay nothing. Anything over that you pay 10% on the difference, until you reach the next bracket, etc. The top bracket is 35%, so if you make a lot of money and have no deductions, your overall tax rate approaches 35%.

But the tax law allows deductions, which are essentially things that are not taxed. So some (not all) rich folks manage to get their real tax rate well below their nominal tax bracket.

The AMT tries (with partial success) to put a floor of 25% to 28% under the level at which the rich can drop their tax. If you make enough money that you ought to be paying 30% of your income in tax, but you've claimed deductions that cut your actual tax rate down to 20%, you're going to get hit by the AMT so you pay your fair share after all.

I don't like paying tax. And I pay a lot of tax, let me tell you! But tax is the price we pay for living in a (more or less) civilized society, and I don't have much sympathy for folks who whine because they can't use deductions to get their taxes under 25%. Me, I've never had to pay the AMT because my taxes are always well over the AMT amount, and you only pay the AMT if you've used deductions to get below that amount.

The people I feel for are the ones who don't make enough to live on, the poor slobs making minimum wage at Walmart, who have no health insurance and can't afford decent housing.

You don't want to pay the AMT? Just don't claim any deductions. Then you'll pay your real tax rate. All the AMT does is limit the amount of your income that you can shelter from tax.