The Alternative Minimum Tax (AMT) is one section of the tax code everyone, regardless of political party affiliation, seems to hate. Originally designed to ensure the wealthiest Americans wouldn’t be able to avoid paying a fair share of tax, the AMT isn’t adjusted for inflation, so an increasing number of not-as-wealthy Americans are subject to higher tax bills.
Right now, politicians are concerned with the debt ceiling. Congress limits the amount of debt the federal government can owe, and this maximum must be raised every so often because essentially the economy runs on debt and relies on debt to operate. A special bipartisan team in Congress, the “Gang of Six,” now leads the charge in determining how to prevent disaster while keeping as many politicians in Washington as satisfied as possible.
If nothing is done about the debt ceiling, politicians and economists do claim there could be a financial disaster. While this has never happened in the past, and every time the subject has come up it has been resolved, experts speculate about the outcomes.
- The government won’t be able to send out checks to federal workers and military personnel.
- Federal benefit recipients, like those on Social Security, Medicare, or unemployment, will not receive checks.
- The United States debt would be downgraded by rating agencies, making it less likely investors will buy federal bonds.
Any faith that people, particularly investors, around the world have in the (financial) stability of the U.S. government will be in jeopardy. This is a situation for which neither Democrats or Republicans want to accept the blame. The Gang of Six allows a few motivated members of Congress to work out a deal while the remainder bicker, posture, and try to work their public relations to help sure their outlook is favorable for the next election.
Part of the Gang of Six’s recommendations is the elimination of the Alternative Minimum Tax. This, along with $4 trillion in spending cuts, the Gang believes will allow Congress to agree on raising the debt ceiling. There have been many attempts to eliminate the AMT throughout the past few years, but Congress has never been motivated to follow through with the proposals. This time could be different.
Published or updated July 20, 2011.