| The
Alternative Minimum Tax
A Massive Middle-Class Tax Increase
JULY 2007 -
The AICPA recently held its biennial lobbying day in Washington,
D.C., and—as a participant—I’m pleased to report
that the AICPA Council members from New York saw 12 members of the
New York Congressional delegation. That’s good news for New
Yorkers and New York State CPAs. It means that issues that are important
to you are being communicated to members of Congress, and that New
York interests are being well represented.
It may come
as no surprise that the alternative minimum tax (AMT) was one
of the most talked-about issues at this event. (For a full discussion
of the AMT and its adverse effects on New Yorkers and the nation,
see my March column, “Muddy Waters: The AMT and the U.S.
Tax Code,” online at www.cpajournal.com.) New York Congressional
leaders were eager to solve the burgeoning AMT threat.
The
Essence of the AMT’s Future Impact
Members of
Congress know the AMT was originally intended to ensure that high-income
individuals could not use deductions and exemptions to completely
eliminate their tax liability. They know that only 20,000 people
paid the AMT in 1970, and that, without legislation, about 20
million taxpayers will pay it this year, with an average additional
tax of nearly $3,000. And they know that if the tax code doesn’t
change, as many as 33 million taxpayers may be paying additional
taxes under the AMT by 2010.
Less clear,
however, seemed to be the very essence of what the AMT will soon
become: a massive middle-class tax increase.
Of course,
there may be nothing inherently wrong with incremental
tax increases. As inflation and costs rise, taxes need to follow
suit so the government can pay for the services taxpayers need
or have come to expect. But what appears to have been lost in
the debate on Capitol Hill was that the AMT is set to explode
on the middle class in a very nonincremental, nontransparent way.
Normally,
when politicians increase taxes to pay for government services
or social programs, taxpayers can see the increased tax burden
coming, evaluate their representatives’ decisions, and then
decide how to vote. In this way, politicians are accountable to
the voting booth, and American government truly is “of the
people, by the people, and for the people.”
But there
is nothing transparent about the AMT. Most taxpayers don’t
understand what the AMT is, how to calculate it, or why they have
to pay it in the first place—making the AMT a sneaky, hidden
tax.
A
Call to Revise or Repeal the AMT
CPAs are
the professionals people trust most when it comes to their taxes.
Preparers do more than just complete tax returns; they occupy
a key niche in the taxation ecosystem and are well positioned
to diagnose its ills. This means communicating systemic problems
to legislators and advocating for change where it’s needed.
I encourage
all Society members to write or e-mail your Congressperson and
explain just how important it is that the AMT be revised or repealed.
Income taxes should be transparent to taxpayers so they can understand
what portion of their earnings is paid to fund the federal government.
Congressional contact information can be found on the Society’s
website—www.nysscpa.org—by clicking “Government
Affairs,” then “Contact Your Elected Representative.”
Louis
Grumet
Publisher, The CPA Journal
Executive Director, NYSSCPA
lgrumet@nysscpa.org
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