June 27, 2007

CRAPO UPDATED ON DEBILITATING "STEALTH TAX"

Cost of AMT to taxpayers outlined in Senate Finance Hearing

Washington , DC - Tax experts today reaffirmed to Idaho Senator Mike Crapo that the Alternative Minimum Tax (AMT) forces debilitating financial effects on American taxpayers.   At a Senate Finance Committee hearing today, witnesses told Crapo and others on the committee that the so-called "stealth tax" hit four million taxpayers in 2006 and, in just three more years, is projected to affect 34 percent of those who file income tax.  

 

"The Alternative Minimum Tax is truly a stealth tax.   It sneaks up on taxpayers, unfairly assessing exorbitant tax liabilities that are disproportionate to income," said Crapo.   "Those who choose to have children or live in a state that imposes high taxes can be subject to this onerous tax.   And, having children and living in a state with higher taxes are not typically construed as tax avoidance strategies.   If the most recent temporary fix is not extended, exemption amounts will be $45,000 for married couples and $33,750 for most other taxpayers.   The IRS estimates that, in 2006, the average AMT filer owed over $6,000 more than they would have under the regular tax code."

 

Crapo continued, "We're witnessing exponential AMT growth.   In 2006, four million taxpayers were projected to owe taxes under this alternative tax structure.   In 2007, the AMT will affect 23 million taxpayers.   The AMT continues to be "fixed" temporarily, but a long-term solution hasn't been implemented.   For a number of years, I've co-sponsored legislation to repeal this increasingly onerous and unfair tax.   I'm pleased that opposition to repeal has significantly faded, but any fix that Congress agrees to should not include tax increases to act as offsets.   This tax was never intended to apply to the vast majority of taxpayers who are now forced to pay it.   It's an unnecessary tax that requires no offset, just rightful and immediate repeal.   Taxpayers should not have to pay because Congress has been dragging its feet on this issue."

 

Crapo noted that the AMT is not indexed for inflation.   In 1969, the exemption amount was $30,000, designed to prevent wealthy taxpayers from avoiding tax liability.   If indexed for inflation today, the exemption amount would be $165,000.   Instead of targeting the super-wealthy, the AMT targets middle income taxpayers and is projected to apply to 89 percent of married taxpayers whose Adjusted Gross Income (AGI) falls between $75,000 and $100,000 and who have two or more children.   The National Taxpayer Advocate office calls the AMT the "poster child for tax law complexity."   The IRS reports the following 2005 Idaho tax statistics:

             11,543 filers were subject to the AMT.   Of these:

             150 had an AGI under $50,000;

             897 filers (counting married filers as one filer) making less than $100,000 were subject to the             AMT.