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Source link: http://archive.mises.org/3841/expanding-reach-of-the-individual-amt/

Expanding Reach of the Individual AMT

July 17, 2005 by

Three scholars at the Urban Institute have published a paper entitled “The Expanding Reach of the Individual AMT.” It shows the harm done to a growing number of families by this stealth parallel tax system. It started out as a “soak the rich” scheme, but has evolved into much more than that.
President Bush proudly points to his supposed tax cuts for all Americans. That would be a praise-worthy accomplishment of his adminstration except that he hasn’t touched the AMT (Alternative Minimum Tax) system. Until this tax is eliminated, there will not be any real tax relief — regardless what politicians are telling us.
This paper has some good points, at least until page 13 when he starts accepting the Bush mantra of “revenue neutral reform.” If you leave out this section, it’s not too bad of a paper.

Read further the abstract of the paper.

In January 1969, Treasury Secretary Joseph W. Barr informed Congress that 155 individual taxpayers with incomes exceeding $200,000 had paid no federal income tax in 1966. The news created a political firestorm. In 1969, members of Congress received more constituent letters about the 155 taxpayers than about the Vietnam war. Later that year, Congress created a minimum tax to prevent wealthy individuals from taking advantage of tax laws to eliminate their federal income tax liability.

Both the original minimum tax and its successor, the individual alternative minimum tax (AMT), have applied in the past to a small minority of high-income households. But barring a change in law, this “class tax” will soon be a “mass tax.” Current projections show the number of AMT taxpayers skyrocketing from one million in 1999 to almost 31 million in 2010. Without reform, virtually all upper-middle-class families with two or more children will be paying the AMT by decade’s end. The AMT is notoriously complex, and its record on fairness and efficiency is mixed at best. But because of its widening reach, fixing the AMT will be expensive. By the end of the decade, repealing the AMT will cost more than repealing the regular income tax. This paper explains how a tax originally designed to target 155 taxpayers could grow to cover 31 million, discusses economic issues related to the alternative minimum tax, and examines options for reform.

{ 4 comments }

zuzu July 17, 2005 at 6:04 pm

Perhaps I’m getting far off-topic here, but I would look to globalization and tax competition — currently made impotent by the Organisation for Economic Co-operation and Development (OECD) who comprise perhaps the most Orwellian doublethink “Ministry of Plenty” of all the international regulatory organizations — as the only market-based incentive for tax cuts. (“Tax relief” sounds nice, but I don’t care for Lutzspeak.)

Democracy is still, last I checked, a majoritocracy. Real socio-economic problems need distributed/systemic market-based solutions, not mandates from the masses. I don’t want to entrap myself as guilty of “solicitation” or “conspiracy”, but academically speaking, the solution is simply to stop paying taxes.

Paul D July 17, 2005 at 10:48 pm

Zuzu, there’s even a legal, government-sanctioned way to stop paying taxes: stop earning enough money to qualify! :) I suppose if you worked for a currency other than paper, that might work too.

zuzu July 18, 2005 at 12:15 am

Paul,

haha, yes, or ex-patriate…

As far as currency / legal tender, however… I suspect there are historical provisions for farmers to pay their taxes in kind. So, I wouldn’t be surprised if using another money for transactions won’t exempt someone from income-based taxation, or they will simply be subject to capital gains taxation instead.

Also, Metcalfe’s law (revised) makes the opportunity cost of using another currency less desireable as well. (Why else aren’t we all making our transactions with a money that can’t be diluted, such as gold rather than dollars?)

Andy March 1, 2006 at 8:41 pm

Here’s a perspective to consider on the possibility of not paying taxes in the US: http://www.noliability.blogspot.com

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