Here in D.C., the word from IRS folks who’ve been talking with us at the annual Taxpayer Advocacy Panel meeting is that next week is make or break for the AMT patch.
If legislation to keep millions — estimates range from 20 to 25 million taxpayers — isn’t okayed by next Friday, Dec. 21, then the 2008 filing season will be disrupted on a scale heretofore unseen. (Previous blog on this possibility here.)
I’m sure all y’all dedicated tax geeks have been diligently maintaining the great AMT patch watch. In November, the House approved a version. The Senate passed a different version last week (blogged here).
This week, it was the House’s turn again.
In the latest scenario (the post-vote press release with details can be found here), the income exemption would be raised to $66,250 for joint filers and $44,350 for single taxpayers.
The exclusion levels have never been the problem. Rather, the core issue continues to be how to replace the tax money that would be lost by sparing these folks the effects of the AMT.
Representatives, or at least most of them, want to follow
their own rules and pay for the lost AMT cash by getting money
from other sources. Under their latest proposal, AMT money would be replaced, in part, by
collections on the deferred compensation of hedge fund managers. The
majority of Senators already have rejected this — actually any — offsets.
And Dubya, now that he’s found his veto pen, says he’s anxious to use it again if he gets a bill that includes new taxes.
Yep, next week is definitely going to be interesting.
Real taxes for hypothetical families: While the AMT patch is volleyed across Capitol Hill, we’ve got some time to digest the Tax Foundation’s hypothetical examples of families whose tax liabilities would change under the higher exemption amounts.
Tax Foundation number crunchers also take into account the fact that these hypothetical taxpayers would be affected by the possible refund delays this spring if the eventual AMT patch is enacted later and made retroactive.
You can read the scenarios here.
Mike Volpe
I have been following the AMT since 2004. I remember Forbes or one the other business journals writing a long and detailed piece about its evolution and how it was going to get worse and worse if it wasn’t resolved. We are now almost four years later and nothing has been done.
The problem is that the tax has become so vital that cutting it out would put a huge hole in the government’s budget that it needs to be made up elsewhere.
The Dems are more than happy to make up for it with some tax increase on any wealthy person they can find. The Reps want to simply eliminate it without making up for it with any other tax. No one wants to cut spending, so here we are almost four years after I first heard about it and nothing has been done.
Anyone waiting for an agreement had better not also be holding their breathes.
There are two lessons for me about the AMT. The first is the evolution of this tax into something totally different than what it started as. This ought to be a lesson to all to watch out for politicians that claim that tax increases won’t necessarily affect them.
The second is the lesson of what happens when politicians use taxes as a means of waging class warfare. Here is how I viewed both…
http://proprietornation.blogspot.com/2007/12/amt-and-lessons-of-taxation-and-class.html