Originally created 05/16/04

Freeze the minimum tax



Three cheers for the Republican-led House of Representatives' overwhelming 333-89 vote recently to freeze the nefarious alternative minimum tax at the current level.

Repealing the AMT would even be better, but hard-pressed taxpayers will take whatever they can get. Next to the death tax, the alternative minimum tax is the federal government's worst, most unfair levy.

The AMT was installed in 1986 to make sure rich folks couldn't use loopholes in the law - loopholes put there, incidentally, by Congress - to avoid paying any taxes.

The 1986 change, in effect, created two tax systems: One that included many tax exemptions and deductions, and another that didn't. High-income earners were required to calculate what they owed under both systems and then send to Washington whichever yielded the highest amount.

When the AMT was first imposed it affected only about 140,000 taxpayers, according to Congress' Joint Committee on Taxation. Today it affects millions, and 9 million more will pay the AMT next year if the U.S. Senate doesn't follow the House's freeze. The Bush administration also supports the freeze, so there'll be no problem getting the president to sign it.

The reason the AMT is netting more and more taxpayers, actually reaching into middle-income ranks, is because it is not indexed to inflation, as are most other features of the tax code.

Were it so indexed, only a few hundred thousand taxpayers would be paying it. But then the government wouldn't be getting upward of $17.8 billion that the AMT is currently producing.

Despite all the demagogic talk about the very rich owning or controlling most of the nation's wealth, smart politicians know where to go to collect the most revenues - into the pockets of the middle class. That's what the AMT is starting to do now and why the freeze is necessary. Hopefully, it will be the first step toward repeal.

Indeed, the alternative minimum tax, along with the death, or estate, tax are both strong arguments for replacing and greatly simplifying our current archaic tax system with just one tax - a national sales tax.

Such a tax would put the Internal Revenue Service out of business. How can you not like it?