Alternative Minimum Tax

I understand but can't explain it in simple terms. So someone (Schneed10, I'm looking in your direction) explain it in simple terms...and then let's talk about what to do about it.

Essentially, a long time ago in a galaxy far away, when $150,000 was a buttload of money for an American household, the Alternative Minimum Tax rule was put in place to ensure that families making over $150,000 couldn't get out of their fair share of taxes by taking credits and deductions for things like capital gains losses.

Essentially, the Alternative Minimum Tax says OK, go ahead and do your tax return. Figure out how much tax you should pay, based on all the credits and deductions you're eliglbe for. Got it? OK, now if you make over $150,000K as a household, forget that first calculation, we're going to make you pay at least X amount, because you make enough money, you should be paying up a good amount of tax. The X amount is determined by Alternative Minimum Tax.

It was a good idea at the time. I'm not sure when it was put into place, but basically, household income of $150,000 was worth a ton more than it is today. The $150,000 threshold was never indexed to inflation, meaning that as time went along, the $150,000 threshold never increased.

So naturally, as inflation runs its course, more and more families are subjected to AMT who never would have been when the rule was put into place. Certainly nobody should feel sorry for families making $150,000, but because of AMT they now pay an unfairly disproportionate share of taxes.

I believe Congress and the Prez have been talking about junking it.

Alternative Minimum Tax - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Alternative_Minimum_Tax)

"Over the coming decade, a growing number of taxpayers will become liable for the AMT. In 2010, if nothing is changed, one in five taxpayers will have AMT liability and nearly every married taxpayer with income between $100,000 and $500,000 will owe the alternative tax. Rather than affecting only high-income taxpayers who would otherwise pay no tax, the AMT has extended its reach to many upper-middle-income households. As an increasing number of taxpayers incur the AMT, pressures to reduce or eliminate the tax are likely to grow."

Here's what Obama and McCain plan to do about our tax situation:

Obama - Roll back the Bush tax cuts, increase Capital Gains to at least 20%, possibly 28%, cut taxes for families making under $ 75K, keep estate taxes. He is on record as voting for keeping the AMT as is, and against removing the Estate Tax. With a Democratic majority in both Houses of Congress we will pay more in taxes under Obama.

Barack Obama on Tax Reform (http://www.ontheissues.org/Economic/Barack_Obama_Tax_Reform.htm)

Obama is also pushing "Universal Health Care" aka "Socialized Medicine" which will push our tax burden even higher and have our health care system managed by government bureacrats. Imagine needing a medical procedure but having to make a "political contribution" to get it done. This is common in countries with socialized medical systems.

McCain - committed to push legislation to permanently repeal the AMT. McCain is committed to reducing other taxes as well.

McCain Staging Site (http://www.johnmccain.com/Informing/Issues/0b8e4db8-5b0c-459f-97ea-d7b542a78235.htm)

Our current situation is this; there is a huge disparity in who pays the lion's share of taxes in this country. My numbers may be slightly off, but the top 1% of wage earners pay 34% of the taxes in the US. The next 9% pay another 33% and the rest pay the final 33%. The top 50% of wage earners pay approximately 97% of the taxes.

The top 1% made 14% of the total income yet paid 34% of the tax burden. The bottom 50% earned 14% of the total income, yet only paid about 3% of the tax burden.

What do we do? FairTax. Americans For Fair Taxation: (http://www.fairtax.org/site/PageServer) FairTax is a consumption based tax so you basically "pay-to-play".

1) FairTax will eliminate corporate taxes bringing millions of jobs back the the U.S.
2) FairTax takes the power away from Congress of giving tax breaks to favored groups or companies.
3) Enables workers to keep their entire paychecks
4) Refunds in advance the tax on purchases of basic necessities.
5) Abolishes the IRS and repeals the 16th Ammendment.

We also need to be more involved in holding our political leaders accountable and greatly reduce "pork" spending. We need to get rid of congresspeople who hide $ 90K in their freezers, or build "bridges to nowhere", or appropriate millions to family and associates. This stuff is happening on both sides of the aisle and needs to be stopped.

Impose Term Limits - 8 years for Reps, 12 years for Senators.

Our government is supposed to serve the people, not the people serving the government. The more control (taxes, regulations) given to government the more it will take, until we are a socialist state. If we look at the government's power from 1900-1950 vs. 1950 to now, we are much further down the path to socialism than many believe. As few nudges upward in the tax rate and a few expansions in government programs and our tax burden would be close to 50%.

P.S. The current administration has been as much to blame for this as any Democrat.

There are myriad problems with your post, beginning with the fact that you are clearly drawing from a highly partisan site operating under the guise of being strictly looking at 'the issues'. I'm running off to the gym so don't have time to respond in full, but briefly ...

1) Universal health care and "socialized medicine" are not synonymous. Providing citizens with health care coverage - and Obama is going light on this issue by not even discussing a single-payer plan - does not mean that doctors work for the government. It means the government pays the bill. Currently I pay $5,000+ a year to be on my wife's health insurance, and my deductibles are such that I really can't get any real meaningful medical treatment without paying out of pocket anyway. Basic point is that you should get your information from a less partisan source. When you start seeing phrases like "socialized medicine" and "government bureacrats" that is a tell-tale sign you are probably getting a slanted view.

2) I hate it when I see some guy in a beat up truck with a "Fair Tax" bumper sticker. Taxing consumption is a regressive form of taxation. Quite simply, people who don't make a ton of money (such as myself) spend nearly their entire income. People who make lots of money do not, they save, invest, etc. This is why people fought for progressive tax structures at the beginning of the century. Tax reform is necessary, but taxing consumption is not the answer.

3) I really should try to avoid the 'Parking Lot'.

Here's what Obama and McCain plan to do about our tax situation:

Obama - Roll back the Bush tax cuts, increase Capital Gains to at least 20%, possibly 28%, cut taxes for families making under $ 75K, keep estate taxes. He is on record as voting for keeping the AMT as is, and against removing the Estate Tax. With a Democratic majority in both Houses of Congress we will pay more in taxes under Obama.

Barack Obama on Tax Reform (http://www.ontheissues.org/Economic/Barack_Obama_Tax_Reform.htm)

Obama is also pushing "Universal Health Care" aka "Socialized Medicine" which will push our tax burden even higher and have our health care system managed by government bureacrats. Imagine needing a medical procedure but having to make a "political contribution" to get it done. This is common in countries with socialized medical systems.

McCain - committed to push legislation to permanently repeal the AMT. McCain is committed to reducing other taxes as well.

McCain Staging Site (http://www.johnmccain.com/Informing/Issues/0b8e4db8-5b0c-459f-97ea-d7b542a78235.htm)

Our current situation is this; there is a huge disparity in who pays the lion's share of taxes in this country. My numbers may be slightly off, but the top 1% of wage earners pay 34% of the taxes in the US. The next 9% pay another 33% and the rest pay the final 33%. The top 50% of wage earners pay approximately 97% of the taxes.

The top 1% made 14% of the total income yet paid 34% of the tax burden. The bottom 50% earned 14% of the total income, yet only paid about 3% of the tax burden.

What do we do? FairTax. Americans For Fair Taxation: (http://www.fairtax.org/site/PageServer) FairTax is a consumption based tax so you basically "pay-to-play".

1) FairTax will eliminate corporate taxes bringing millions of jobs back the the U.S.
2) FairTax takes the power away from Congress of giving tax breaks to favored groups or companies.
3) Enables workers to keep their entire paychecks
4) Refunds in advance the tax on purchases of basic necessities.
5) Abolishes the IRS and repeals the 16th Ammendment.

We also need to be more involved in holding our political leaders accountable and greatly reduce "pork" spending. We need to get rid of congresspeople who hide $ 90K in their freezers, or build "bridges to nowhere", or appropriate millions to family and associates. This stuff is happening on both sides of the aisle and needs to be stopped.

Impose Term Limits - 8 years for Reps, 12 years for Senators.

Our government is supposed to serve the people, not the people serving the government. The more control (taxes, regulations) given to government the more it will take, until we are a socialist state. If we look at the government's power from 1900-1950 vs. 1950 to now, we are much further down the path to socialism than many believe. As few nudges upward in the tax rate and a few expansions in government programs and our tax burden would be close to 50%.

P.S. The current administration has been as much to blame for this as any Democrat.

Dont think capital losses affect AMT for your average capital gain/loss (stock or bond). Normal capital gains and losses allways get netted. If you have just losses you can only take 3k deduction per year but cary foward any remaining.

Ive allways been taught to think about it like a completely different tax. So if you calculate what your tax would be normally (skip that section of the 1040), and AMT wise and you just pay which everone is greatest. It makes people who are allowed certin dedutions under the normal tax code add things back.

Some AMT add backs for you schedule A'ers are Medical Expenses, Investment Interest, Charitable Deductions, Casualty Losses, Gambling Losses and Home Equity Loans.

The Standard deduction and Personal exzemption isnt allowed.

Preference items are tricky. If you have them odds are you are at the very high end of the scale the AMT affects, or have very low earned income.

There are myriad problems with your post, beginning with the fact that you are clearly drawing from a highly partisan site operating under the guise of being strictly looking at 'the issues'. I'm running off to the gym so don't have time to respond in full, but briefly ...
The facts are what they are. The positions I stated for Obama and McCain are their positions based on quotes directly from them. What difference does it make what site the facts came from if they are correct?
1) Universal health care and "socialized medicine" are not synonymous. Providing citizens with health care coverage - and Obama is going light on this issue by not even discussing a single-payer plan - does not mean that doctors work for the government. It means the government pays the bill. Currently I pay $5,000+ a year to be on my wife's health insurance, and my deductibles are such that I really can't get any real meaningful medical treatment without paying out of pocket anyway. Basic point is that you should get your information from a less partisan source. When you start seeing phrases like "socialized medicine" and "government bureacrats" that is a tell-tale sign you are probably getting a slanted view.
I was referring to the broader term of "socialized medicine", which means the government administering and paying for the program but the doctor's & hospitals being independent. I didn't mean that the doctors and hospitals would be government entities. Either way, my point is that if Universal Health Care or socialized medicine is pushed through it will create a massive tax burden on the American taxpayer. Each person should be responsible for their own health care, not the government. I agree with government oversight to prevent abuse or negligence, but not control.

I understand the high cost of insurance. I pay a significant amount also. I also have seen the problems of Medicare first hand. When my father was very sick prior to passing away, my mother was working and had insurance that covered him. When he hit 65, the insurance company was able to drop his coverage because he was forced to Medicare. When this happened the benefits dropped greatly. The quality of the health care we receive will definitely decline under a government managed system. Government rarely does a better job than private industry at anything.
2) I hate it when I see some guy in a beat up truck with a "Fair Tax" bumper sticker. Taxing consumption is a regressive form of taxation. Quite simply, people who don't make a ton of money (such as myself) spend nearly their entire income. People who make lots of money do not, they save, invest, etc. This is why people fought for progressive tax structures at the beginning of the century. Tax reform is necessary, but taxing consumption is not the answer.
You should look into the program rather than use the beat-up truck, red-neck generalization. The Fair Tax is designed to put the money of the American people back in their pockets and take the power away from Washington. Imagine getting your whole paycheck back rather than the reduced amount from taxes taken out. That paycheck you earned is yours, not the government's. In the Fair Tax program there are also "pre-bate" checks sent out to families to cover the taxes that would be paid on basic necessities.

The Fair Tax also effectively taxes the underground economy of illegal activities and illegal immigrants.

The payroll tax is actually a regressive tax. The Fair Tax is not. Check out the link for an explanation.

Americans For Fair Taxation: (http://www.fairtax.org/site/PageServer?pagename=about_fairtax_four#regressive)

AMT is total crap. A great example of our politicians "thinking" and coming up with a great idea then f*ing i up and watching like a bunch of pollyanna wimps while it screws average Americans. Why any of us trusts any of them to do anything remotely competent in service to our country baffles me.

AMT is total crap. A great example of our politicians "thinking" and coming up with a great idea then f*ing i up and watching like a bunch of pollyanna wimps while it screws average Americans. Why any of us trusts any of them to do anything remotely competent in service to our country baffles me.
That is why the government needs to have the least amount of power possible. Everything they do gets screwed up, but for some reason people want to give them more power and control.