Alternative Minimum Tax (AMT) / Hybrid Tax Credit Change

Great. Another tax cut for the wealthy.

 

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 10:18 AM) [snapback]256340[/snapback]</div>

Talk to the people paying AMT and still having to work like a horse to support their family.

In 10 years, everyone not under poverty line will have to pay AMT... :lol:

 

<div class='quotetop'>QUOTE(dipper @ May 16 2006, 01:27 PM) [snapback]256343[/snapback]</div>

The law is written to allow the non-refundable tax credits for everybody, not just working folk recently affected by the fact that the AMT is not indexed for inflation.
The vast majority of the benefit of this aspect of the tax cut will be enjoyed by the wealthy (again).

 

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 01:34 PM) [snapback]256348[/snapback]</div>

I'm not a tax expert, but I can tell you that the AMT would have hurt most of the middle class people in my geographic location. We have oppressively high property taxes and not being able to take the deduction would have been a back-breaker.

Just on the basis of my Prius alone, I will get back $5200 as a tax credit now that I wont be subject to the AMT. I would not have been able to afford the car without getting back this money.

Yes, the tax breaks might help the wealthy, but they can also help the people they are intended to help. This accomplishes its goal.

Of course, I am extremely biased in this matter because of how much I would have suffered if I was subject to the AMT.

 

<div class='quotetop'>QUOTE(Amyshubby @ May 16 2006, 03:21 PM) [snapback]256423[/snapback]</div>

You had no guarantee that the AMT would change and you bought a car you couldn't afford without it?

The purpose of the AMT was to prevent the weathy from using deductions and credits to get out of paying their fair share of taxes.
Making non-refundable credits available to them again goes a long way toward giving those loopholes back.

Keep in mind, the legislators didn't have to write this in such a way as to disproportionately give money to the wealthy, they chose to write it that way.
It would have been very easy to index the AMT to inflation or some other reasonable method to keep the middle class from being subject. (You'll notice that this is exactly what they did not do.)

 

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 12:33 PM) [snapback]256427[/snapback]</div>

Why can't we have flat tax already?

I also hate hybrid owners getting tax breaks too.... :lol:

 

We don't need a flat tax to eliminate deductions and credits.
Deductions and credits are just mechanisms to hide government spending.

 

<div class='quotetop'>QUOTE(efusco @ May 16 2006, 04:04 PM) [snapback]256453[/snapback]</div>

There is no bottom line difference between the government passing a spending bill to send me a check for say $100 and the government opting to exempt me from $100 in taxes.
In the end, I have $100 more and the government has $100 less so the two actions are equivalent.

The AMT is commonly characterized in more or less the same words I used by those who enacted it.

From: http://www.reformamt.org/reasons.php, an organization dedicated to AMT reform.
C. Alternative Minimum Tax

Both the Alternative Minimum Tax and its predecessor, the Add-on Minimum Tax, were intended to require all taxpayers to pay their fair share of taxes. The concern expressed by Congress was that wealthy taxpayers, because of their wealth and access to resources, were able to employ tax strategies or invest in tax shelters that allowed them to reduce or practically eliminate their income taxes. This was seen as unfair and discriminated against people of ordinary means who then ended up paying a proportionately larger percentage of their income in taxes. What lawmakers had in mind in subjecting ISOs to AMT were wealthy, senior executives with high six- and seven-figure salaries who choose to take several million more in the form of ISOs.

 

<div class='quotetop'>QUOTE(efusco @ May 16 2006, 04:18 PM) [snapback]256468[/snapback]</div>

Well, I'm a bottom line kinda guy and deductions and credits quack just like spending ducks to me.

As for your question, I'm ok with either progressive or flat tax systems provided deductions and credits are eliminated.
In other words, paying taxes in proportion to your income (and while we're at it, treat all income the same; no different rates for capital gains, etc.).

I do not believe people will stop supporting charities if tax deductions go away.
Let's try it and see.

 

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 01:27 PM) [snapback]256474[/snapback]</div>

The whole dual court system of equity courts and law courts, which came to colonial America from England, evolved because of the various tax treatment of estates in real property and the transference of legal estates to avoid taxes. The equity courts evolved to override the legal courts.

Anyone who thinks that tax policy and structure does not affect the actions of people are naive. Granted, some people may not be affected, but many and most are.

Never thought I would cite the Heritage Foundation research, but here is a link to a paper talking about the charitable contributions in Europe and the lack of the deduction.

http://www.heritage.org/Research/Taxes/IB60.cfm

I have notice in my own experiences in Japan that charitable organizations are a relatively new idea and there is no deduction for charitable giving.

George

 

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 01:18 PM) [snapback]256340[/snapback]</div>

Jeez, give me a break. I'll bite at this one...Here goes...

Yep, those evil wealthy people. All they do is go to college and graduate school for years at a time to become doctors, engineers, creators of businesses, etc. And they even get lots of money for that. Go figure. They have the nerve to spend that money (only what the gov't leaves them) on things that not so wealthy people make (boats, cars, airplanes, houses).

Let's get rid of all those evil wealthy people. I say tax 'em all at 90% so they "pay their fair share"! After all, the gov't is so much better at spending your money; not those evil wealthy people.

Let's take away all incentives to get wealthy. Want to be a doctor; $5.15/hr. Want to be a lawyer; $5.15/hr. Want to be construction worker; $5.15/hr. Then everyone would be the same and no one would be wealthy. Ahh, Utopia at last..


Rick
2006 #4 (an evil, wealthy person who drives a Prius)

 

<div class='quotetop'>QUOTE(efusco @ May 16 2006, 04:50 PM) [snapback]256490[/snapback]</div>

"Fair share", why that's easy. The politicians' PRECISE definition of "fair share" is anyone who makes more than you does not pay their "fair share". And anyone in your tax bracket pays too much in taxes. Simple...;-)

We all know being a doctor is real easy... I watch ER on the TV... the residents have lots of fun...;-)))

Rick
2006 #4 (a Prius driver who does not pay his "fair share")

 

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 03:33 PM) [snapback]256427[/snapback]</div>

To be totally honest, I didn't know the AMT exemption was something that had to be renewed every year until I started reading the Priuschat board. I just thought I was guaranteed to get back the $5,200. Pretty nice incentive for a $26,000 car. I even changed my withholding so I have less money taken out every paycheck for the rest of the year (why give the government a 5k interest free loan?)

If I knew the AMT was going to be an issue, I probably would have purchased a Prius with less expensive options to save a few thousand dollars. I was buying it either way to get into the HOV lane.

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 03:33 PM) [snapback]256427[/snapback]</div>

That's not the effect it would have had. It would have devastated hundreds of thousands of people near me who are being faced with ever increasing property taxes, utility bills and (you guessed it) gasoline bills. Due to the high property taxes, most of my region would have been hurt by this. Some are wealthy, most are not.

<div class='quotetop'>QUOTE(Kiloran @ May 16 2006, 03:48 PM) [snapback]256440[/snapback]</div>

Huh? My three biggest deductions are my property taxes, my mortgage interest and things related to my kids (daycare, etc). How is this hiding government spending?

<div class='quotetop'>QUOTE(efusco @ May 16 2006, 04:18 PM) [snapback]256468[/snapback]</div>

I totally agree. It's not just an incentive, its an effective one!

 

I for one believe a "fair share" would be a minimum tax per person per year, say, $15,000. If you earn $20,000, you pay $15,000. If you earn $250,000, you pay $15,000. What do you think? This way, everyone pays their fair share, a minimum entrance charge to use the USA.

At the very least, eliminate all tax above $100,000. Anything you make over $100,000 a year is tax free. After all, you've probably paid over $30,000 in tax, which would be DOUBLE the fair share already.

This is kind of how the Social Security tax works, there is no tax after a certain income point. Every year my check goes up after I hit the limit (which rises every year, by the way, I think it's over $90,000 right now).

I shouldn't have to pay MORE tax than some idiot driving a Hummer earning $50,000 a year, but I do.

Rich people SHOULD get more tax breaks. It helps them stay rich. Our society NEEDS rich people because they contribute to society rather than drain from it.

Who's with me, eliminate taxes on all income over $100,000?

Nate

 

Our federal income tax system is progressive. Those who make more pay more of a percentage of their income than those who make less. Period. The "fair share" argument makes no sense when you realize this. The "wealthy" pay a far more proportionate share of their income in taxes as the rest of the population. According to the IRS, in 2003, the top 0.7% of wage earners paid 26.5% of total tax revenue, even though they earned only 16.4% of total income.

AMT became necessary when the top bracket was reduced to mid-30% range (it has fluxuated over time since 1986). Top-top earners were able to pay a reduced effective tax rate by use of shelters not available to those at the very bottom of that bracket. Since the trigger point hasn't been indexed to inflation, more and more people at the bottom end of the bracket are being treated as if they are at the top, thus increasing the effective tax rate for those people.

You can debate all you want about whether ALL non refundable credits should be AMT exempt, but if the goal of the credits are to modify people's behavior (and they are), then the less you make them available, the less desired behavior you are going to get. Using the hybrid tax credit is a perfect example. The idea is to get people to use hybrid technology and reduce emissions, which reduces the hidden costs of pollution to the economy. Since you have to lay out the full $25k to buy the car in the first place, most low wage earners aren't going to be able to afford the car no matter what the tax credit is. If you eliminate the availability of the credit through AMT to the people most able to afford the car in the first place, the credit will have ZERO effect. Perhaps that was the intended effect when the credits were proposed last year before gas prices super-spiked (it allows the gov't to say they are "green" but the result is no net effect to revenues or behavior). In today's political climate, real behavioral changes are desired.

I don't know every single non-refundable tax credit on the books, but I'm sure many were intended to have actual economic effects that were reduced by AMT neglect. I'm equally sure many were "goodies" inserted into the code to help special constiuencies. Most of the time those kinds of special treatment are reserved for corporations, which aren't effected by AMT issues. As a rule, I'm in favor of tax rules having a real effect rather than window dressing. It makes people pay attention.

 

Bottom line pls... If I buy an 06 Prius will I get to claim a tax break this year?

Tks
Monks