Did you know Democrats just cost you an additional $2000. in taxes?
A deadline looms today, and it will not be met. Unless Congress fixes the Alternative Minimum Tax (AMT), the IRS will have no choice but to print next year’s tax forms based on current law, which would force 25 million taxpayers to pay, on average, an unexpected, additional $2,000 in taxes.
If the AMT is fixed after today’s deadline, the Treasury Department announced in a letter to Congress, then the delay in printing proper IRS forms will create confusion for millions of taxpayers this spring and delay tens of millions of taxpayers’ refund checks by up to two and a half months.
Democrats are the ones responsible for this — for creating the tax in the first place, for raising it, and for failing to fix it in time. Most responsible of all for the current mess, and for Congress’s failure to act, is House Ways and Means Chairman Charlie Rangel (D., N.Y.).
The Alternative Minimum Tax was originally enacted by a Democratic Congress in 1969, in order to stop a handful of wealthy families from using deductions and loopholes to avoid tax liability altogether. But the high income threshold at which the tax is triggered was never indexed to inflation. In 1993, the Democratic Congress and President Clinton raised the AMT tax rate, but again failed to index for inflation.
As a result, inflation is carrying more and more workers across the AMT threshold each year. Congress, therefore, has had to “patch” the tax temporarily each year, raising the threshold at which it must be paid. If Congress does nothing, the government tax collections would increase through the AMT, dramatically and entirely by accident.
Republicans view the AMT’s expanding reach as a mistake. They passed a repeal of the tax in 1999, only to see it vetoed by President Clinton. In more recent years, they lacked the courage to fix it permanently because it would have invited screams of “tax cuts for the rich,” and made future deficits look much worse on paper. Yet when they controlled Congress, at least Republicans “patched” the AMT each year so that millions of taxpayers could avoid paying all that extra money.
Publicly, Democrats pretend that they, too, consider it a “mistake” for the AMT to ensnare roughly 25 million taxpayers. But their actions now speak louder than their words. They passed an AMT “patch” last Friday — H.R. 3996 — but it raises taxes on small businesses and entrepreneurs by $81 billion, in order to recover the revenue that is “lost” by not mistakenly ensnaring millions of Americans in the AMT.
With the Democrats’ so-called “pay-as-you-go” rule in hand, and under the guise of “fiscal responsibility,” Chairman Rangel is essentially blackmailing taxpayers: “Either support us in our mission to hike taxes, or we’re going to let the AMT have all 25 million of you!”
A spokeswoman for Rangel was sticking to this “fiscal responsibility” line on Wednesday, and indicated that the tax-hike bill that Democrats passed last week along party lines took care of AMT, and that was that. But the bill they passed has absolutely no chance of passing the Senate, and even less of being signed by President Bush — something of which House Democrats have been aware all along.
Senate Democrats are not happy about what their colleagues have done here. Even Democrats in the House resented that they were being pressured by their own leadership to vote for a large tax hike. “Why should House members have to walk the plank?” asked Rep. Jim Cooper (D-Tenn), speaking to Congress Daily. “This is a 130 percent tax increase.”
Rangel does not appear to have thought this one through quite as well as he usually does. By failing to act, he may be putting his party’s pinkie finger on a new “third rail” of politics.
Everyone expects the AMT to be fixed this year for the same reason it always has been fixed in the past — failure to do it could cause a taxpayer rebellion. If, as appears likely, Congress fails to pass a real AMT fix before today’s deadline, it will probably be fixed eventually. But many taxpayers will end up with obsolete tax forms (12 different forms are affected by the AMT), creating a huge snag for the IRS. An astounding $75 billion in tax refunds to as many as 50 million people could be delayed for up to ten weeks.
That’s great news if you’re a government bean-counter, because you’re essentially getting an interest-free loan of $75 billion from American taxpayers. It’s very bad news, though, if you are a taxpayer trying to pay your energy bills, your child’s tuition, or your overpriced mortgage.
It might also be bad news if you are a Democratic politician who helped create the Great Tax Confusion of 2008.
- 1 decade agoFavorite Answer
Yes. They refused to send a clean bill (non-pork barrel bill ) to the President.
"With nothing being done, old AMT tax law will expose 50 million Americans to higher taxes next year.
The Democrat led congress can't even fix the little problem of the looming AMT tax law problem. Instead, of creating a simple bill to help families avoid a new tax, the Democrat congress is planning to approve a massive bill that will increase taxes.
The Democrats even disingenuously labelled the bill a "Tax Reform" bill.
Democrats also use "reform" when talking about immigration. Their latest "immigration reform" plan is to offer citizenship and welfare to each and every illegal immgrant in the U.S.. At the same time Democrats are against more border enforcement."
Treasury Secretary Paulson Seeks 'Patch' For AMT.
Congress Urged To Act Before Tax Forms Are Printed
"But in announcing a plan today to increase taxes on working families by a staggering $1.3 trillion - the largest income tax hike in American history - Democrats have found a way to outdo even their most historic tax-raising schemes of the past. Indeed, as the chairman suggested, this is the 'mother' of all tax bills. And given its scale, it might be the father, grandfather, nephew and second-cousin of them as well."
Democrats Outdo Themselves with "Mother of All Tax Hikes"
- Uncle PennybagsLv 71 decade ago
It will get patched this year. Maybe not in time to stop the printing of the forms.
The reason it doesn't get fixed permanently? Because the Dems see that pot of money and they salivate over what pet projects they could do with it. Think of all the middle class people they could give health care too? Think of all the social programs? They just haven't thought of a way to make it palatable to us yet. They keep patching it until they do.
The 2nd biggest reason they don't really want to fix it permanently? It's because the AMT sticks it to the rich, potentially those earning 50k or more.
- Anonymous1 decade ago
Excuse me, republicans had a lock on the government for six years, why didn't they fix it? Also for your information it basically affects people making between 100-500K a year, eleven percent of the population and that eleven percent is in the top twenty five percent earners in America. Sorry but I think the top quarter earners in our society have ways to shield themselves and probably don't pay their fair share in taxes. How much should I care that a CEO has to pay twenty eight percent on his millions every year. Everything about your questions is misleading. I notice you don't include any numbers. The internet is a wonderful thing it gives you all sorts of tools to find information.
- Mele KaiLv 61 decade ago
Is this the Mother of all Tax Bills? Well... they took two weeks off after today and all the hard work. The Senate blows the funding to keep our brave soldier's safe? Pork alright. Way, way too much. Perhaps it's best they take a time out.
Excellent answers btw. Thanks to everybody & good Q! Aloha
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- busterwasmycatLv 71 decade ago
geez, i was looking in all that for the cutoff income (for when the AMT actually kicks in) but never found it.
Now let me make sure i GOT THIS RIGHT:
- the AMT applies to high income earners and is used to make sure they pay at least something;
- The income level where you are mandated to pay this "at least something" is not indexed to inflation (neither is my income by the way);
- approximately 8 % of the US populaton might make more than this income (using your figures which I wonder about and would verify if I cared);
- It doesn't make you pay MORE, it just makes sure you pay SOMETHING.
Is this about right or did I miss something, because your rambling got kind of dull and I skimmed it only as soon as I figured what it was all about.
And since it doesn't affect me (I sure as heck am not in that rarified atmosphere where this applies), I should care BECAUSE?
- garyb1616Lv 61 decade ago
Also the Palosi tax bill (Largest in History) that the left wants to pass, will lower the minimum rate thus adding 5 million working poor who were exempt under the Bush plan back on the tax rolls... also they will bring back the marriage penalty which will effect middle class tax family's.......and they say they are looking out for you.....
- Anonymous1 decade ago
Average means the rich pay the rest off us pay much much less, if anything at all..
Crying wolf again are we.
- Anonymous1 decade ago
Why do I feel the dems have a giant tube of KY for us.
- Anonymous1 decade ago
Did you know that W has cost every American family of 4 approximately $40,000 for his illegal war in Iraq over non-existant WMDs?
This $2000 is what bothers you though, huhn?
Man, your priorities are right on target...
- Anonymous1 decade ago
Why is this a Democrat issue, when Bush vetoed the bill that would have fixed the problem?