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Dr. Winston O'Boogie
Citizen
Username: Casey
Post Number: 1049
Registered: 8-2003
| | Posted on Tuesday, February 8, 2005 - 9:06 am: | 
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A lot of our SOMA residents are currently caught in the AMT trap, and many of you are going to get snared in it over the next few years.
From today's NYT regarding Bush's plans for cutting the federal budget deficit:
quote:Mr. Bush's own projections leave out the cost of rolling back the alternative minimum tax, a parallel tax that is expected to ensnare tens of millions of middle-income households as incomes rise with inflation. Republicans and Democrats both want to prevent such a trap, but a fix would cost roughly $500 billion over the next 10 years.
Better move to a red state, or sock away your current tax cut, 'cause in a few years you're gonna need it to pay the AMT.
Bet a lot of you Bush supporters didn't realize the income tax cuts would disappear for you, did you? |
sportsnut
Citizen
Username: Sportsnut
Post Number: 1730
Registered: 10-2001
| | Posted on Tuesday, February 8, 2005 - 9:46 am: |
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I wish it were in a few years. For some of us its here already. I think we've been paying AMT for the last two years and will cough up nearly 4 k in AMT this year.
Bet a lot of you Bush bashers will continue with the mantra that the tax cuts were only for the rich. So which is it Dr. did wealthy folks get a tax break or didn't they? |
Tom Reingold
Supporter
Username: Noglider
Post Number: 5396
Registered: 1-2003
| | Posted on Tuesday, February 8, 2005 - 11:01 am: |
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sportsnut, if you didn't get a tax break, then your taxes wouldn't go up if we rolled back the big tax breaks that Bush provided, right? |
Dr. Winston O'Boogie
Citizen
Username: Casey
Post Number: 1050
Registered: 8-2003
| | Posted on Tuesday, February 8, 2005 - 11:15 am: |
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The Bush tax cuts have certainly benefited wealthier taxpayers overall. The exceptions have been in high tax states like NJ, NY, MA, etc, where upper middle class families end up in AMT territory.
If Bush wanted to give tax breaks, a more sensible idea would have been to reform the AMT. But that's not what he wanted to do. Is it because he couldn't care less about people in places like NY and NJ? Who knows? But if you're well off and you live someplace like TX or FL, you got a tax break windfall, didn't you? |
sportsnut
Citizen
Username: Sportsnut
Post Number: 1733
Registered: 10-2001
| | Posted on Tuesday, February 8, 2005 - 11:36 am: |
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Tom,
I think overall I'm still better off but not as much as most people think.
That said if the difference in my tax liability is only $1500 or so I could care less, it doesn't matter one way or the other to me. The problem I have is how that money is spent.
In another thread you posted an analogy to a household budget - would you continue to throw good money after bad in your own budget? I think its legitimate to ask that question. Themp also posits that he/she is ok with paying more taxes without even questioning where the money is going. That's just not prudent policy, IMO.
We've had this discussion many times before and I've always said that if my money is being spent wisely I have no problem paying the taxes I pay, but when they aren't spent wisely and the response I hear is that its impossible to cut spending I get frustrated and angry.
Dr. I think you give Bush too much credit when you say he didn't want to reform the AMT - I'm guessing that it caught him by surprise and wasn't designed to function that way. |
Dr. Winston O'Boogie
Citizen
Username: Casey
Post Number: 1051
Registered: 8-2003
| | Posted on Tuesday, February 8, 2005 - 11:43 am: |
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sportsnut,
maybe you're right, but AMT has been a looming issue for many years. if Bush is relying on economic and tax experts who didn't see how it was going to effect upper middle income households, it doesn't give me much confidence in them. |
Tom Reingold
Supporter
Username: Noglider
Post Number: 5401
Registered: 1-2003
| | Posted on Tuesday, February 8, 2005 - 12:11 pm: |
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In his op-ed column today, Paul Krugman says:
quote:In spite of the expense of the Iraq war, federal spending as a share of G.D.P. isn't high by historical standards - in fact, it's slightly below its average over the past 20 years. But federal revenue as a share of G.D.P. has plunged to levels not seen since the 1950's.
He goes on to say that spending cuts are not likely to happen, nor would they help much. He points out that higher taxes are the only fix.
Read the rest at http://www.nytimes.com/2005/02/08/opinion/08krugman.html
If you don't have a login, use the username "flocculent" and the password "fuzzy1".
Anyway, back to the AMT. I googled it and found an article that tries to address the question of how do you know if you are subject to the AMT. And he said there's no easy answer. I'll have to rely on my accountant. I suspect I'm not subject, but I really have no idea. |
themp
Supporter
Username: Themp
Post Number: 1431
Registered: 12-2001
| | Posted on Tuesday, February 8, 2005 - 12:17 pm: |
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I would like to see balanced budgets, maybe not every single year, but at least an honest effort toward them. I don't believe it is actually possible to shrink gov't down to our current revenue - especially given our onging military and security costs. I think that the tax cuts were ill-considered. It is useful for people to actually put theories to the test from time to time. We are now testing long-held theories about shrinking government and lowering taxes and the will of republicans to "slash spending". If Bush is unable to present budgets that, even excluding Iraq costs, approach balance, we should maybe reluctantly conclude that we as americans like a government that spends more money, so we should go about collecting it. I volunteer to pay my share. |
Mark Fuhrman
Citizen
Username: Mfpark
Post Number: 1256
Registered: 9-2001
| | Posted on Tuesday, February 8, 2005 - 12:56 pm: |
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Sportsnut, I think most rational people agree with your stance. In fact, poll after poll finds that the vast majority of Americans want to rein in federal spending (and local also) and get rid of waste.
The problem is that when you ask people which programs to cut specifically, they don't want to cut specific programs. Or if they want to cut a program they don't care about (say, education), someone else wants to keep it just as bad. That is the rub--all politics is local, but all funding is federal. Tragedy of the commons and all that.
Still, I would think that with $2.5 TRILLION there would be a lot of places to save things that are trivial. I know in my company when they tell me I have to cut 10% of expenses I scream like a stuck pig but somehow find a way to continue to provide excellent service with less. Why can't I expect this of government? |
sbenois
Citizen
Username: Sbenois
Post Number: 13142
Registered: 10-2001
| | Posted on Tuesday, February 8, 2005 - 11:40 pm: |
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The AMT is potentially devastating to places like Maplewood where a dollar in property tax increases to AMT trapped residents is a real, whole dollar. This, no doubt, will place a ceiling on our home prices as more people hit the AMT cap and decide that a 12k tax bill in Morris County is better than a 20k bill in Maplewood if neither can be deducted under AMT rules. Those are 8000 real dollars in your pocket.
We were the first community in the state to pass a local resolution calling for changes in the AMT law. But according to Dave the Rave, he's gotten absolutely no response from our Senators on the issue (as of early January). |
Dr. Winston O'Boogie
Citizen
Username: Casey
Post Number: 1052
Registered: 8-2003
| | Posted on Wednesday, February 9, 2005 - 9:30 am: |
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absolutely.
And the fundamental unfairness of what the AMT has morphed into shouldn't be tolerated. While it was initially intended to crack down on phony tax shelters, it now ensares people who are trying to claim legitimate deductions.
Take two taxpayers with the same annual income, one in Maplewood, one in Houston. Mr. Houston pays less federal tax than Mr. Maplewood only because Maplewood guy is paying MORE property taxes. That's just insane as tax policy. But Bush's income tax cuts (which give very little benefit to people in towns like ours) make it impossible to afford sensible AMT reform.
Admittedly, neither party is giving much attention to this issue, but hell will freeze before the Bush Administration looks into any issue that has disproportionate impact on states that didn't vote GOP.
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malone
Citizen
Username: Malone
Post Number: 264
Registered: 5-2001
| | Posted on Wednesday, February 9, 2005 - 12:56 pm: |
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Actually,
That is not correct. The fellow in Houston pay's more in federal tax, and perhaps the same (if the AMT wipes out the higher deductions for Mr. Maplewood). Mr. Maplewood pays higher total tax because he now has to pay the same federal tax as Mr. Houston, and the higher state and local tax.
Of course, Bush knows this. Everyone knows this. Complain to your liberal democratic senators who allowed it to happen. Perhaps if people in NY, NJ, CA, etc. elected a Republican every once in a while, the scales would not be tipped in the Red states favor. |
Dr. Winston O'Boogie
Citizen
Username: Casey
Post Number: 1053
Registered: 8-2003
| | Posted on Wednesday, February 9, 2005 - 1:06 pm: |
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you're right that your example could be true, but most often it's not. for someone just over the threshold of the AMT, in most cases they're paying more than someone at the same income level whose deductions aren't high enough to trigger the AMT.
since no one from either party has put AMT high on their agenda, I can't see how electing Republicans to the Senate from NJ will make any difference.
I'm just pointing out that a lot of people in NJ voted for Bush in large part because they expect lower taxes. in fact, many of them will see little or no benefit from those tax cuts unless they move somewhere without a state income tax. |
Dr. Winston O'Boogie
Citizen
Username: Casey
Post Number: 1054
Registered: 8-2003
| | Posted on Wednesday, February 9, 2005 - 1:18 pm: |
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Obviously I'm not an accountant, and I can't explain this very well, but here's an overview written by an expert:
quote:Under current law, about 36 million people will be on the AMT by 2010, almost 14 times as many as in 2001. Without EGTRRA, the number of AMT taxpayers in 2010 would have been about 18 million. If the AMT had been indexed for inflation along with the regular income tax in 1981, and if EGTRRA had not been enacted in 2001, only about 300,000 people would have to pay the AMT in 2010 (
The focus of the tax will also shift, with a greater share of the middle class paying the AMT. In 2002, 1.4 percent of filers with incomes between $50,000 and $75,000 and 3 percent with incomes between $75,000 and $100,000 will face the AMT (all income classes are measured in 2001 dollars). By 2010, those figures jump to 43 and 79 percent, respectively.
http://taxpolicycenter.org/publications/template.cfm?PubID=310565
It's a problem for middle class taxpayers, the Bush tax cuts have made it worse, and it's going to hit people hardest in places like Maplewood. That's the bottom line, even if I can't explain the technical reasons why. |
malone
Citizen
Username: Malone
Post Number: 265
Registered: 5-2001
| | Posted on Wednesday, February 9, 2005 - 2:04 pm: |
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We need an accountant to clear up exactly how this works. But, unfortunately, its that time of year. They are all too busy calculating AMT to post! |
Pizzaz
Citizen
Username: Pizzaz
Post Number: 1456
Registered: 11-2001
| | Posted on Wednesday, February 9, 2005 - 4:45 pm: |
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Here's a little read as to the basics. Malone, you're right - I don't have time to be here. 
http://moneycentral.msn.com/articles/tax/basics/1407.asp |
sportsnut
Citizen
Username: Sportsnut
Post Number: 1735
Registered: 10-2001
| | Posted on Wednesday, February 9, 2005 - 9:20 pm: |
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Obviously, there are quite a few variables that go into this calculation and making sweeping generalizations is dangerous, however, I did a very quick return assuming a single person earning 250K with 20K of mtg. interest and 10K of state income taxes.
I than ran the return with two property tax amounts one at 12K and one that showed 6K. The return with a 6K property tax deduction paid more in federal income tax (62K vs. 57K).
If you'd like to see other scenarios let me know and if I have the time I'd be happy to run them and post the results. |
sportsnut
Citizen
Username: Sportsnut
Post Number: 1737
Registered: 10-2001
| | Posted on Wednesday, February 9, 2005 - 10:12 pm: |
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Dr. I will pay AMT again this year and my property taxes are "only" 11K. Of course my wife works in NY so our state income taxes are quite high but that's another story. |
Dr. Winston O'Boogie
Citizen
Username: Casey
Post Number: 1060
Registered: 8-2003
| | Posted on Wednesday, February 9, 2005 - 10:21 pm: |
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I deleted my post because I don't think it made much sense.
It's really the combination of state and property taxes, and as you say, there are a lot of variables. |
sbenois
Citizen
Username: Sbenois
Post Number: 13155
Registered: 10-2001
| | Posted on Wednesday, February 9, 2005 - 10:45 pm: |
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What it comes down to is that the tax rates have been lowered over the years as the result of the bracket ranges moving higher.
But in the AMT calucation the brackets haven't been adjusted accordingly. In addition, property taxes, which are deductible under the regular calc, are excluded from the deductions in the AMT calc.
So if you make a 200k per year and you're married filing jointly (let's forget exemptions, dividends,etc):
it's
200k - 9k state tax - 11 k real estate tax = 180k of taxable income at rates that have been adjusted for inflation over the years.
vs
200k - 9k - 0 = 191k taxed at unadjusted rates (although there are exemptions and further formulas). The AMT is generally a larger number and Uncle Sam says, I'll what you owe me from that first calc, thanks. And now I'll take the difference between THAT number and the one you just figured out in this one. Thanks for that also.
This little trick has allowed Bush to claim that he lowered taxes (because he's referring to the FIRST CALC). And the lack of knowledge about it has allowed the effects of the SECOND CALC to be missed by those claiming that he did this for "THE WEALTHY".
The only WEALTHY who really gained by this tax cut were those in low real estate taxed states.
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oots
Citizen
Username: Oots
Post Number: 189
Registered: 6-2001
| | Posted on Wednesday, February 9, 2005 - 11:20 pm: |
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s
not true-if your income is $350k and up you may be out of amt range. $350 is just a guess, but the super rich $1000000/yr most likely pay no amt and recieved unbelievable tax cuts. |
sbenois
Citizen
Username: Sbenois
Post Number: 13157
Registered: 10-2001
| | Posted on Wednesday, February 9, 2005 - 11:29 pm: |
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Could very well be. I'll check it out. |
oots
Citizen
Username: Oots
Post Number: 191
Registered: 6-2001
| | Posted on Thursday, February 10, 2005 - 9:50 am: |
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ok, I ran some #'s-looks like the $350k range is still well into amt, at $500k-depending on deductions-you may be beyond it. above that chances are no amt.
oots |
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