"A. Bruce King" <abruceking[at]comcast.net> writes:

- quote -

The lack of indexing is only part of it.
An enormous amount of the impact causing folks to
be forced into AMT from the old tax system is the
growing number of deductions and exemptions that
keep getting added or increased.

They could keep heaps of folks off of the AMT by
getting rid of the added complexity created by
various special-case goodies.

A lot of the hatred folks aim at the AMT should
be aimed instead at the politicians who keep adding
complexity to the regular tax code as a means of
giving goodies to various constituencies without
making it look like they're paying them off on
the spending side of their budgets.

- quote -

In the 2001 tax cuts, Congress increased the size of
the AMT exemptions so that while they increased the size
of goodies given to non-AMT files, they wouldn't be
forcing all of them into the AMT.

The 2001 increases in the AMT exemptions were expanded
again in 2003, for the same reason.

However, the increases in the AMT exemptions are set to
expire at the end of 2005, so for 2006, the AMT exemptions
go back to their 2001 levels, while all the goodies which
lowered folks non-AMT taxes don't expire at that point,
so suddenly, all the folks who would have been pushed into
the AMT by the 2001 and 2003 tax cuts but were saved by
the expanded exemptions - they get hit.

Do a google search for "AMT exemptions expire" for more
reading.

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Mark -

Thanks for the interesting article on the Working Families Tax Relief Act of
2004. It seems this Act preserved the temporary deduction increase for
children and most of the other temporary tax benefits enacted earlier.

The main thing I saw in that article relating to the AMT was reversion to
the $45,000 deduction for 2006. It still seems very surprising to me that
making that one change would increase the number of taxpayers subject to AMT
six-fold.

Bruce King

A. Bruce King wrote:
- quote -

Yes it is correct.

AMT is (as the WSJ editorial notes) effectively a flat tax:
1) How much did you make?
2) Subtract $N (e.g. $58K for married filing jointly).
3) Pay 26% (or 28%).

Obviously, the more you subtract off, the less likely this AMT
calculation will come out higher than your "ordinary" income tax.

This exemption amount was increased under Bush's earlier tax cuts; like
most of the cuts, it was temporary. Originally, it was scheduled to
last through tax year 2004. The Working Families Tax Relief Act of
2004 extended the increase in AMT exemptions through tax year 2005.

Once this sunsets, the exemption reverts to its older, lower amount,
people's AMT amount goes up, and thus many more people are instantly
subject to AMT. That is currently scheduled to happen in tax year 2006.

http://www.nysscpa.org/cpajournal/20...ntials/p42.htm

The original source of the WSJ graph may be seen at:
http://www.treas.gov/press/releases/...=0\&SEARCH.Y=0

--
Mark Freeland
nBeOwXs[at]pacbell.net

I am well aware of the growing impact of the AMT on taxpayers because of the
lack of indexing causing more and more to be impacted as incomes rise.

What I was not aware of was the increase of the number of taxpayers affected
in 2006 increasing from 3 to 21 million (as per graph in today's WSJ
editorial). Is this correct? If so, would some one please explain why the
striking increase in 2006.

Bruce King