Alternative Minimum Tax(AMT) is a tax that is triggered when a taxpayermakes a certain income. You calculate yourtaxes, once for the regular income tax and then again for the AMT, then you paywhichever bill is higher. According to William Gale, author of “Fix a Real TaxMess”, in 1969 there was a huge public uproar following a Treasury report thatsaid there were 155 high income tax filers that had paid no income tax. This is when the “minimum tax” was born. AMT is a secondary tax that wasoriginally put in place to prevent the wealthy from using tax sheltering activities. Tax shelteringactivities, according to Turbo Tax, is any legal or illegal strategy one usesin attempt to reduce or avoid income taxes. Instead of the AMT working towards its original goal ofcracking down on tax sheltering activities of the rich, this tax puts burdens offamilies that earn under $100,000. Unfortunately,this tax causes an increase of taxes for middle class families.
According toWilliam Gale, this was supposed to bring in a lot of revenue by 2008, but whenthe article was put out William Gale said the AMT was less than 10 percent ofits revenue from its anti-shelter provisions. Many people are against this tax for many reasons. Besides the AMT increasing taxes for middleclass families, the paperwork is said to be unnecessarily complex. Also, unlike regular taxes, AMT remainsunaffected by inflation, causing the AMT to continue to rise every year. With all of these imperfections of the tax,it has put law makers in a tough position, because they can’t outright do awaywith the tax. Repealing this tax cancost up to $800 billion over the next decade.
Consequently, according to William Gale, there would have to be some additionalreforms. One would include increase the AMT exemption and raising rates aswell. He spoke about another attack thatwould completely repeal the tax and the anti-shelter provisions directly intothe regular income tax. This of coursewill cause there to be a significant rise in income tax rates, but the authorsees it as a small price to pay.
I amnot sure how much this would raise taxes or who exactly it would be effected,but I know a lot of people aren’t able to handle a rise in income tax rates.Thefinal bill, passed in 2017, increased exemptions so a lot more people will beable to get out of AMT in 2018 to 2025, when the provisions are set to expire. This is one of the suggestions William Galemade, and I agree it was a good one. Those families making $200,000 to $500,000 will still have to pay AMTbut it just won’t be as much.”Earlier bills called for the elimination ofthe Alternative Minimum Tax. The final version keeps it, but reduces the numberof filers who would be hit by it by raising the income exemption levels to$70,300 for singles, up from $54,300 today; and to $109,400, up from $84,500,for married couples.
” (Sahadi, 2017).Ihave mixed feelings about the AMT because I feel like the intentions for thetax, ensuring the rich don’t make it possible for them find loopholes to getout of paying their income taxes, was good and solid but sadly, despite theirgood intentions the execution was of this tax law was poor. Now it is to a point where we are not able tocompletely repeal this act because of how much it will cost. Leaving middleclass families to pay all this money. Fortunately, even though the tax wasn’t repealed, at the end of 2017 thetax law was amended.