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Repealing the Alternative Minimum Tax (AMT)

by Flexo on January 8, 2007

in Taxes

The Alternative Minimum Tax (AMT) is a rule that was established in the United States tax code to make sure rich people don’t take advantage of loopholes to the point where they owe no tax to the government. The minimum income required to qualify for the AMT was never adjusted for inflation, so over time, more and more people have qualified for the AMT.

Some Democrats and Republicans in the Senate have joined forces to introduce a bill to repeal the AMT.

… [T]he number of taxpayers nabbed by AMT will jump from 3.5 million in 2006 to 23 million for tax year 2007 and to 39 million by 2017, according to the Tax Policy Center. That assumes President Bush’s tax cuts implemented since 2001 expire as scheduled. If they don’t, then 53 million taxpayers – or about half of all taxpayers – will pay the AMT by 2017.

However, repealing the AMT in its entirety might have a devastating effect. It will be much more difficult for the federal government to balance the budget by 2012 without this income.

For more information on the AMT, see Alternative Minimum Tax 101. While the law may be repealed in the future, it still applies to your 2006 tax return.

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Flexo, the owner and creator of Consumerism Commentary, has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow him on Twitter.

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  • I highly doubt it'll pass, the democratic congress will squak that this is just a bunch of rich people trying to get out of paying taxes.
  • I have a better idea - repeal the entire tax code and pass the Fair Tax (http://www.fairtax.org). It's revenue neutral, progressive, and relieves the poor of any tax burden.
  • Tom
    Gotta agree with Green, no chance of this happening. If the problem really is just that it hasnt been adjusted, why not just index it?

    As for the "Fair Tax", no sales tax can be progressive in my opinion. Sales tax will always hit the poor the hardest. I support a progressive income tax (higher percentages paid the more you make which isnt done in many states) and an elimination of all sales taxes.
  • I agree with Tom. How can this be progressive? Sure, there's a rebate up to the poverty level, but then, as you reach the low/middle class, it becomes a regressive tax since these people must spend a larger proportion of their income. I think the group of people just above the poverty line are the ones getting screwed over already because they don't qualify for federal programs like Medicaid but probably can't afford an insurance policy because of the increasing costs.
  • Tom and Stingy,

    Sales tax is inherently flat, but the Fair Tax is different. There is a "prebate" for the taxes that you pay on the basic costs of living. Essentially, EVERY tax payer will get a prebate for the amount of taxes that they will pay in the next month. This would be determined based on the cost of living in areas. From what I understand, it may be down to the zip code. Anyhow, this makes it progressive, because up to a certain limit there be absolutely zero federal taxes (and this includes FICA, etc). That is a better deal for the poor than all of the breaks we currently have.
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