The Alternative Minimum Tax Silencer

I've never advocated for the Alternative Minimum Tax because it never affected me. Without giving away too much on how I earn, it seems every time the waves of the AMT reach my financial front door, they seem to be swept away by another few bags of sand, in the form of a "patch."

The AMT is a lovely little tax that has only two rates - 26% and 28%.  If you reach the magic IRS amount, you will be made to calculate your income tax twice - first through the traditional method, and then through the AMT - and then pay the higher tax amount.  With the AMT, you cannot claim the standard or personal deduction; other deductions are very limited.  You would end up paying a LOT more in taxes, and you'll be very lucky to escape alive (with a refund).

Over the past few years, the AMT has become more like a surf wave that hits more houses, as it has never been indexed to inflation since 1969.  It would make sense to raise the AMT level, rather than having tens of millions of middle class earners to fork over an obscene amount of tax.

A new, revised AMT would involve the following:

1. Those earning more around $250,000 for singles, $375,000 for head of household, and $500,000 for married couples would automatically be subject to calculating the AMT.  Once the AMT is paid for the year, a credit is applied to next year's taxes.

2. The percentages on which levels would be increased from 26% to 33% for $250,000-$500,000 and from 28% to 35% for above $500,000.

3. All members of Congress - including the President - will automatically be subject to the AMT for as long as they hold office.

Now, I don't earn $250,000 a year, but the people who would be affected would be the same people clamoring for higher taxes - like celebrities, sports players, entertainers, activists, and other lobby groups.  It would certainly shut them up when they see that they're on the hook with Uncle Sam for at least $82,500 - the cost of a luxury car, a vacation to an exclusive island, a Rolex, or a shopping spree in New York - and perhaps more, because the AMT doesn't allow deductions.  They cannot schmooze away what they really owe with fancy accounting footwork - they have to bite down and write that check.  It would be a treat to watch Bill Gates, Warren Buffett and other billionaires be forced to fund the government to the tune of $350 million per billion.

This is what Obama should unequivocably advocate for - updating and raising the level of the AMT, while excluding a lot of middle class earners from it.  By doing so, it would bring in real revenue from the real rich - those with an aristocratic attitude who want to influence the daily lives of others through their caprice, their arrogance, and their profligacy.  Recalibrating the AMT also alienate and infuriate all his friends and supporters that contributed millions to his (perpetual) campaign, only to be backstabbed with higher taxes.

Maybe with elections, forced retirements, and other activities, some authentic tax reform will come around that everyone would agree would be fair, bring in the appropriate revenue, and finally end class warfare.  But you and I know that Congress, given short time, would probably put in quick fixes until the same, tired, cliched drama rolls around next time.