Dire new Tax news...

[MarinJohn]

If we had a flat tax based on gross income and no person or entity excluded (including churches, non-profits, corporations, etc) I am willing to bet the tax rate would be sufficent at less than 5%. Of course, it would be grossly unfair as the wage earner would 'get away' with murder whereas self-employed people like building contractors would get killed as over half of their gross income is for materials, and not profit. none-the-less it's all a pipe dream as money talks (lobbyests) and 'po folks pays.

[Tempus]

Originally posted by kirbinster@Mar 18 2006, 12:20 PM
Nope you are wrong.  AMT is around 25-28% - which makes it just about a flat tax.  There should be no such thing as deductions, credits or exemptions to any tax.  Those are all items that complicate the system to favor special interests.  If there was a flat tax the super rich would pay more tax than you can imagine.  Just think if they got not exemption or deductions and actually paid 25% of what they got as income?

[snapback]226476[/snapback]

You really don't have much of a clue do you.

The AMT is 'just about' a flat tax.

Wow.

If there was a flat tax, then yes, the rich would pay more, but that is far from what happens with the AMT.

As I said, if you want a flat tax, pass the law for it, but pretending that the AMT has any effect like a true flat tax, or that it affects wealthy people at all is just mind boggling.

Of course, unless you're very wealthy. Then I can completely understand your wanting to keep up that fiction.

[bsd43]

The AMT is not a flat tax! Without the ordinary tax, people who make under the exemption limit basically pay no tax. And there're still a lot of preference items to keep the rich away from the AMT.

If you want a flat tax, then put in a real flat tax. The AMT isn't it.

(Not that I'm using it now, but I do have an accounting degree. And I'm pretty sure kirbinster needs to understand more about the AMT.)

[kirbinster]

Kirbinster understands the AMT very well and has been paying it for years. Kirbinster simply believes that everyone should pay tax and at the same rate and that the government should not reward people for having 12 kids or buying a house that they could not otherwise afford. Kirbinster also thinks that the government budget should be frozen and no increases should be allowed beyond the rate of inflation and incremental tax moneys should reduce the deficit and that the tax code not be used by special interest groups to forward their social policies.

[moomin]

Kirbinster also thinks that the government budget should be frozen and no increases should be allowed beyond the rate of inflation and incremental tax moneys should reduce the deficit and that the tax code not be used by special interest groups to forward their social policies

In principal, I hear what you're saying. But, frozen when? It makes a massive difference.

Under Reagan and G. H. W. Bush federal spending was just above 22% of GDP, Clinton lowered that (unwillingly) to 20%. G. W. Bush has lowered it a fraction of a percent further. If we had frozen government spending during the Reagan revolution and had continued to spend 22% of GDP we would have spent $234,686,000,000 more last year alone. If we'd frozen it under Nixon that number jumps to $817,956,000,000 in spending annually.

If we froze spending at 20% today and collected all anually assessed taxes from individuals and corporations the debt would be totally paid in just over ten years. But under Carter the total federal debt was less than 40% of GDP... if we'd frozen federal spending mid-malaise we would've paid off the debt by 1982.

None of which has anything at all to do with a flat tax, or the current status of the AMT.

A Federal flat tax would be fair, easy, and would result in a rapid repayment of the Federal Debt... Contrawise the AMT will strike 26 million middle class Americans, wiping out nearly all tax deductions and rebates, leaving those in the upper income brackets totally untouched. This is an unnecessarily punative and mean spirited way of forwarding the flat tax argument... in the end the only result is going to be a net loss in support for fiscal responsibility.

And, as a final thought, you point out:

the government should not reward people for having 12 kids or buying a house that they could not otherwise afford.

Which is, again, a perfectly reasonable point. But the anciliary is that the government should promote and reward responsible behavior. It would seem, by the same logic you use above, that the Hybrid Tax Credit is enlightened, and should be protected from this capricious deletion at all costs.

[daniel]

The basic income tax is (slightly) progressive: if you make less than $7,300 and you are single, you pay nothing. Anything over that you pay 10% on the difference, until you reach the next bracket, etc. The top bracket is 35%, so if you make a lot of money and have no deductions, your overall tax rate approaches 35%.

But the tax law allows deductions, which are essentially things that are not taxed. So some (not all) rich folks manage to get their real tax rate well below their nominal tax bracket.

The AMT tries (with partial success) to put a floor of 25% to 28% under the level at which the rich can drop their tax. If you make enough money that you ought to be paying 30% of your income in tax, but you've claimed deductions that cut your actual tax rate down to 20%, you're going to get hit by the AMT so you pay your fair share after all.

I don't like paying tax. And I pay a lot of tax, let me tell you! But tax is the price we pay for living in a (more or less) civilized society, and I don't have much sympathy for folks who whine because they can't use deductions to get their taxes under 25%. Me, I've never had to pay the AMT because my taxes are always well over the AMT amount, and you only pay the AMT if you've used deductions to get below that amount.

The people I feel for are the ones who don't make enough to live on, the poor slobs making minimum wage at Walmart, who have no health insurance and can't afford decent housing.

You don't want to pay the AMT? Just don't claim any deductions. Then you'll pay your real tax rate. All the AMT does is limit the amount of your income that you can shelter from tax.

[moomin]

That's a better overview of the AMT dilema than I could've given. My only qualm is the use of the term "Rich." In post millennial dollars, $60,000 of income for a married couple, where both parties work, should put you somewhere in the middle class. Under the forcast 2006 AMT they'll be treated as "Rich."

Me, I've never had to pay the AMT because my taxes are always well over the AMT amount, and you only pay the AMT if you've used deductions to get below that amount.

But unless you've got a fairly massive gap between AMT and your assessed tax rate sans deductions in 2005, the strong likelihood is that you'll be caught in the AMT regression next year. You may be fortunate enough to sail right over the new limits, but millions of people aren't.

And, while you argue:

You don't want to pay the AMT? Just don't claim any deductions. Then you'll pay your real tax rate. All the AMT does is limit the amount of your income that you can shelter from tax.

The tax code is designed (as you point out) to be "slightly" progressive. The progressive nature of the code extends to the variety and nature of the deductions allowed. Most of those deductions are only attainable to those in the upper income brackets. When an attainable tax credit, like the Hybrid Vehicle credit comes along it's newsworthy for a reason.

But this year the middle class had a shot at a credit that would've taken the sting out of a purchase of an environmentally reasponsible vehicle. Whether this was due to liberal guilt , compassionate conservative reenorcement of normative behavior, or some sort of Keynesian wealth redistribution there are comparatively few deductions that are within reach of the lower and middleclass tax payer. Now it looks likely that it will be taken away. This seems not only unfair, but mean spirited.

The people I feel for are the ones who don't make enough to live on, the poor slobs making minimum wage at Walmart, who have no health insurance and can't afford decent housing.

But a few of them have saved up over time, and might just have been able to afford a Prius. And this tax credit would've helped to that end. They could've taken pride and satisfaction in being rewarded to do something virtuous for the environment. Instead they're likely to have that opportunity taken from them by a process that is hostile to their interests to begin with.