President Obama last night unveiled a new twist on an old idea in his State of the Union address to Congress -- limit the loopholes and tax giveaways that very wealthy people use to reduce their taxes far below the rate honest workers pay. Obama called for a minimum tax rate of 30 percent on income over one million dollars. To some, this sounds like a radical idea, but it really isn't. It is merely a refinement of a part of the tax code that has been with us for decades: the Alternative Minimum Tax.
The A.M.T. was enacted for precisely the same reason Obama is calling for a 30 percent tax rate on every dollar made over and above the first million per year -- fairness. The ultra-wealthy have always been able to afford spending money to use tax shelters and tax attorneys to move their dough around so they avoid paying what they should be paying -- the same rates everyone else pays. So the A.M.T. was introduced to fix the problem. If you make a substantial amount of money, you must figure your income taxes two ways: the traditional way, and using the A.M.T. worksheet. Whichever's higher, in essence, is what you must pay (if you fall under the rules for using the A.M.T.).
Now you may be thinking, "I've heard of the A.M.T. before... something about Congress 'fixing' it... " This is where we get into some massive budgetary fiction, or (if you prefer) blatant hypocrisy by our lawmakers (of both parties, it bears mentioning). The problem stems from the fact that the A.M.T. has not been truly modernized in quite a while. The income limits it set when it was enacted covered people who made a lot of money back then -- but when you fast-forward three or four decades, the same dollar amount now regularly hits people in the middle class (and really hits people in the upper middle class), rather than its intended target: the truly wealthy.
This is where the hypocrisy comes in. Why don't the folks in Congress just up the limits? It's common sense, right? If there's a problem with the dollar limits to the A.M.T., then adjust the limits and it works as intended again. Simple!
Well, that's what does indeed happen. Every single year, like clockwork, Congress passes an "A.M.T. fix," usually late in December when they think nobody's paying attention. They do not do this by honestly fixing the law, but instead by only carving out an exemption for a single year. There's a reason for this, which is where the budgetary fiction comes in. When Congress puts together a federal budget, they project it out for ten years into the future. These projections are nothing more than smoke and mirrors to begin with, because nobody -- that's nobody, no matter how many economic degrees they have -- can accurately predict the future, whether economically or otherwise. Putting that fiction aside, though, the A.M.T. is a fiction on top of this basic budgetary fiction. Because the A.M.T. -- if not "fixed" -- is scheduled to take in billions and billions of dollars in tax revenue. To put it another way, by using the outdated A.M.T. formula in the ten-year projections, it makes the budget picture look rosier than it actually is. If the A.M.T. were permanently fixed -- instead of year-to-year, the way it is done now -- then the deficit projections would be a lot larger. The fact that this is closer to actual reality matters little, because most people aren't aware of the fiction and the hypocrisy Congress regularly operates under.
So we continue "fixing" the A.M.T., and Congress pretends that they're not going to fix it for the next nine years, and the budget numbers are easier to work with -- even though Congress does indeed fix the A.M.T. each and every single year, and the tax revenues in the budget projections never actually appear. Once again, to be clear: both political parties are in on this scam. They both use the fictional numbers, while they know full well it is nothing more than a pipe dream that this money will ever materialize in the U.S. Treasury.
Which brings us back to Obama's suggestion in the State of yhe Union. While to some it might sound like a brand-new program, it really isn't. It would just be beefing up and modernizing the A.M.T. so that it works as it was originally intended -- to make sure the ultra-wealthy are paying the same rates as everyone else. But there's a golden opportunity here as well, because Obama's plan would bring in more money -- actual, real money and not fictional, budgetary-dream money. Because more money would be coming in, it would be the prime time to institute a permanent "fix" on the A.M.T. -- because the new income could balance out the "loss" of the fictional income in the ten-year budget projections.
It is silly and (at its core) dishonest to "fix" the A.M.T. every single year as if it is some sort of emergency situation. It should be fixed once and for all. If Obama's new "Alternative Millionaires' Minimum Tax" were combined with such a permanent fix, it could also be a lot easier to sell politically, since it would be "lowering taxes" on millions of households (in the ten-year projections), while only forcing a relative few households to "pay their fair share, just like everybody else." I realize this is no more than political rhetoric, and I also realize the chances of Obama actually passing this scheme are extremely low this year.
Whether it passes or not, it's an idea that most Americans are going to agree with -- even more so if the threat of paying the A.M.T. is removed entirely for (say) all households making less than $250,000 (Obama's usual dividing line for the middle class). End the A.M.T. on the middle class, and beef it up considerably on the millionaires and billionaires. Tying the two together is the logical way to go, and it also has the benefit of removing the yearly hypocrisy over the fictional budget numbers for nine out of ten of the projected years. It's time to end this scam -- perpetrated by both parties -- once and for all. Obama should go ahead with his A.M.M.T., and at the same time reform the A.M.T. so that Congress won't have to perform this fudging of reality every single year.
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No one can argue that your solution for implementing the "Buffet rule" via the AMT isn't logical. The problem is the premise that fosters the AMT in the first place. It presumes that government revenues are a "tribute" that must be paid by all who are wealthy, as the price of being wealthy, because government is somehow "owed" for the very opportunity to acquire wealth. But the American dream is not for the nation to work for the prosperity of it's government, the dream is instead for government to work for the prosperity of the nation; the government owes the nation the opportunity to acquire wealth.
The AMT and the "Buffet rule" both turn the time-tested axiom of "the business of government is business" on it's head, and instead proposes that "the business of business is government".
...which explains mightily why "hope and change" has been such a colossal failure....
The sign of a truly generous person is someone who gives without regard to their assets, their tax deduction and the PR they usually attempt to get. Mr. Gates would be wise to give anonymously and stop seeking PR for his donations.
Now I do applaud Bill Gates for attempting to hold charities feet to be more accountable for the money they receive. Too many charities, particualarly the ones associated with the UN tend to have too many hands in the pie and little ends up getting to the intended recipients.
Income inequality is growing because our government and economy are arranged as a money pump sucking what's left of the working population's wealth straight up to the elites. I don't see how a 30% minimum tax rate is going to fundamentally change this state of affairs. It would be like putting pressure on a bleeding artery - good first aid, but not life saving intervention.
But this is not the point. The point is that people like Romney can aford to hire lobbyists and spent tons of money on political campaigns for only one purpose: get the capitals gains tax from let say 25% to 15%. Or plant a lopphole. If you sped 5 mln on key politicians and get 20 mlns in tax breaks, isn't that a return you never get on stock market?
Teapartiers, please take your head out of the sand, before you are completely destroyed by the very people you support!!!
And by THAT way of looking at it, he DOES pay quite a bit less than she does. Not to mention the fact that he should be paying MORE as a percentage of income than she does because every dollar she pays in taxes is money that she won't spend in the economy, whereas every dollar HE pays in taxes is money that would otherwise be "invested" back into making him more money!
If corporations are people then the money they make should be taxed as other people are.
www.fairtax.org
So, your class warfare act is now to the point that wealthy people are not Honest? My uncle owned a delicatessen in Philly and made a lot of money but was a hard working individual putting in well over 60-70 hours every week. Lots of wealthy people are hard working and HONEST.
Are you somehow claiming that Gov Romney did not come by his money HONESTLY?
Further to the point. He pays a higher rate of Federal Income Tax then 80% of Americans according to CNN. So are you claiming that only 20% of Americans are honest?
Is that really what you are saying? That only 20% of Americans are Honest workers? What type of GARBAGE are you writing today?
I have not even read the rest yet. but I am sure it will be a pile of joy and will let you know my feelings on it.
Romney got $374,000 in speaking fees. Gingrich gets $60,000 per speech.
Your resentful umbrage seems contrived.
My brother has a PHD in Neuropsychopharmacology from an Ivy league university and he has an MD from same school. He occasionally gets paid to give talks by some pharmaceutical companies because of his expertise. Nothing dishonest about it.
Commencement speakers at colleges are often paid, and can earn big fees for it.
Is the Jersey Shore's Nicole "Snooki" Polizzi worth more than a Nobel Prize winner? The Rutgers University Programming Association certainly thinks so. They paid the reality star $32,000 for a Thursday night Q&A with 1,000 students. Meanwhile, Nobel Prize and Pulitzer Prize winning author and professor Toni Morrison will receive only $30,000 for speaking at the school's commencement on May 15.
Who is going to give a more intelligent and prestigious speech; Pres Clinton or Snooki? Shouldnt Clinton get more for a speech then Snooki? So why not Romney?
There is nothing inherently dishonest about speaking fees. Pres Clinton earned over 75 million in speaking fees.
"Long-term capital gains receive the same preferential rate under the AMT as they do under the regular income tax."
So your whole point on the AMT would not effect people like Romney or Buffet. They earn capital gains that are taxed at a flat rate of 15%. Adjusting the AMT does not effect them anymore then raising a top rate does.
Just more reasons to go to a flat tax.
The biggest mistake ever made with tax law was with the 2001 and 2003 tax cuts. For nearly a century previous Congresses responsibily raised taxes in times of war and lowered them in times of peace. That pattern was irresponsibily broken by a GOP majority Congress when they lowered taxes during a time when we were fighting a global war on terror in two countries. It was the ultimate test of the GOP ideology regarding taxes, that is, lower tax rates equate to greater tax revenue. Obviously, it was a failed idea that has led to our govt facing unheard of levels of govt deficit and debt.
Replacing the AMT with the AMMT is another band-aid solution. However, it does, hopefully, open the national conversation that massive tax reform is needed.
www.fairtax.org
I do, though, most heartily concur, that taxes need to be SIMPLE. Just don't think the flat tax idea nor the sales tax idea are feasible nor fair.
At the current individual tax rate of 15% on qualified dividends, the effective federal tax rate due to double taxation is still 43%. Most progressive would still call that a fair tax rate - except those that believe the tax rate on high income individuals should approach 100%
Zero tax on the first $50,000 of income from any source and a 30% flat tax on all earnings, from any source (including dividends and capital gains) above $50,000. No deductions of any kind. No tax on sale of primary residences.
A back-of-the-envelope calculation shows that this would bring in 33% more revenue ($300 billion more) than is currently being brought in.
Sorry but I have become so mistrusting of anything legal or political. I wish I didn't feel this way
www.fairtax.org