Talk:Alternative minimum tax

The statement "However, CBO's rules[6] state that it must use current law in its analysis and at the time of the above text was written, the AMT threshold was set to expire in 2006 and be reset to far lower values." is ambiguous. What will be set to lower values, the income thresholds, the tax rate?

Dubious Tag Added

In the "Arguments Against" section, I tagged the bullet that the AMT amounts to a flat tax as dubious; the graph earlier in the article shows the AMT rate increasing (albeit at a decreasing rate) with an increase in gross income. A flat tax would show a constant (independent of income) rate. Sketch051 13:27, 11 June 2007 (UTC)

Sketch051, I made the graph and a made that edit, so I don't think they disagree. But, I can see where you are coming from. A flat tax usually has a cutoff before which it doesn't take effect, i.e. when in the 1980s Robert Hall and Alvin Rabushka presented the idea of a flat tax, and the first about $40,000 were not taxed, this is the same idea. If you have any more questions, I'd be happy to answer them, otherwise, please remove the tag. Pdbailey 02:13, 12 June 2007 (UTC)

I see where you're coming from. I've removed the tag, but also softened the argument ('flatter tax' rather than 'flat tax') to clarify; after all, there are still some deductions allowed with AMT. Sketch051 11:29, 12 June 2007 (UTC)

Additionally, a flat tax - even with the first $X exempt - would show a constant slope in the amount of tax paid, just with a non-zero x-intercept; the graph shows a concave-up curve for the amount paid. Sketch051 17:08, 12 June 2007 (UTC)

Sketch051, look again at the y-axis label, it's in relative terms. It can only asymptote to the level of the flat tax. Pdbailey 02:00, 13 June 2007 (UTC)

I'm referring to the upper of the two graphs, which shows "Tax (thousands)" on the y-axis. A flat tax which simply exempted the first $40k would have an x-intercept of $40k and be a straight line with a slope of the flat rate. The graph shows that the rate continues to increase with an increase in income, and thus is not a flat tax. It does grow slower than the conventional tax curves, so it is a flatter tax, but it is not flat. Sketch051 13:51, 13 June 2007 (UTC)

Ah, I see. The top graph does have the value of the tax in dollar denominated terms on the y-axis. And you are correct that on a graph with linear x and y axises with the income on the x-axis and tax on the y-axis, the line would slop upward with a slope of 0, 0.26, or 0.28 (the tax rates). However, the x-axis is logarithmic, so the slope will increase. As an aside, if you know how to program in a computer language, you could probably read the code used to generate the graph. Pdbailey 14:18, 13 June 2007 (UTC)

I'd missed that. Would you be willing to regenerate the graphs in linear-linear or log-log? I think the average Wikipedian might understand them more intuitively that way. Sketch051 14:52, 13 June 2007 (UTC)

I think log-log is confusing and linear-linear severely reduces the scale that is visible. In the sense that an x-y pair on the graph represents the tax at that level, I think readers can understand a graph--which is to say that I don't think the slope is the idea of this graph, I think the x-y pairs is. Also, log linear graphs appear all the time in newspapers. Pdbailey 15:12, 13 June 2007 (UTC)

You're right, I've been getting distracted by the one point (how 'flat' is the AMT) and have forgotten that the graphs do adequately show that the conventional income tax levels are getting closer to the AMT line over time. I'd still like to leave the change in the Argument Against ("flatter tax" instead of "flat tax") due to the fact that deductions are merely more limited, rather than eliminated see True Flat Tax. Sketch051 18:28, 13 June 2007 (UTC)

I don't object to that wording. Pdbailey 21:12, 13 June 2007 (UTC)

I'll go ahead and object to the whole premise of this argument. Those who support a flat tax do so to promote tax simplicity and/or fairness (related to a uniform rate being applied to all taxpayers without the availability of deductions/exemptions -- which permit certain taxpayers to pay lower effective rates). Since the AMT, on top of the standard tax code, is definitely not simple, and most also find it to be unfair, it is, in no way, an argument that supports the retention of the AMT, nor does any legitimate supporter of a true flax tax want the AMT retained. It's more of a false argument to prevent adoption of a true flat tax.

If you want to maintain a neutral POV, then this point should address the idea that the AMT (via its flatness & limits on deductions) allows Congress to continue to tinker with the standard tax code, creating new deductions for favored groups, yet not giving up too much to any individual taxpayer, since a taxpayer who qualifies for too many deductions will probably find themselves subject to AMT, and will lose the benefit of some or most of the deductions that they thought they had qualified for. This is possibly the most important reason that Congress wants the AMT retained. --Jguild3 13:22, 15 October 2007 (UTC)

The idea of flatness or fairness of the AMT is not that it is maintained "on top of the standard tax code" (the current situation) but keeping the AMT and getting rid of the current tax system. The argument for retention is that the AMT would replace the current system. The argument is for the AMT model over the current income tax, not both. Also, what do you mean by a "true flat tax". If you're stating it in the sense of one income rate applied to everyone, no such proposal exists in congress. There are many flat tax proposals in congress, each with some level of progressivity built in, normally through exemption up to a certain income level. I do agree that the AMT is subject to easy manipulation by Congress (as does any income tax system that allows exemptions or the positioning of one income group against another), just as the current system progressed from Reagan's change into today's 65,000 pages of tax code. However, wikipedia is not a crystal ball and should not forcast on what could happen. Morphh ^(talk) 15:23, 15 October 2007 (UTC)

NPOV

This page needs updates. As it is, it does not comply with the NPV rules.

Edited to remove non-npov statements made at end of previous edit without citations.

I just edited the article to try to improve the NPOV situation. Please make comments on my success here. Pdbailey 14:56, 3 November 2006 (UTC)

I just put an NPOV template in the bottom section which seems pro-Republican and anti-Democrat.Squad51 18:29, 5 February 2007 (UTC)

I just moved the template to the whole article; another sections seems to imply that it damages the economy, which I would tend to disagree with. This article is also too technical and needs some cleanup.Squad51 18:34, 5 February 2007 (UTC)

Can you specifically state what you think the problem is? On the section you just NPOVed.... the AMT hits medium to high income individuals and families with large income tax deductions. Because state income taxes are deductible from federal income taxes, the AMT has a tendency to hit individuals in high tax states, such as California, New York, New Jersey, etc... As it turns out, these states tend to be on the coast and generally vote for democrats. Maybe its a bit cynical, but Republicans, who are normally concerned with high taxes, have been less concerned with the AMT. Mgunn 18:49, 5 February 2007 (UTC)

On the harm from the AMT... Any tax causes distortion of economic activity, and economic theory says the harm increases with the square of the tax rate. Any non-Pigouvian tax is automatically harmful. The general policy question is whether the government spending is worth more the harm caused by the tax. That said the AMT has some structure that is considered less harmful than the standard tax system (it has fewer deductions) and some features that are considered more harmful (poor treatment of savings, rates might be excessively high). -- Mgunn 18:49, 5 February 2007 (UTC)

So it seems the NPOV tag has been removed, but I'm certainly not satisfied, and I'm not sure why it's been removed. It's worth noting, for example, that criticisms abound, but nowhere in the article is a defense of the AMT presented -- and certainly this isn't because defenses of the policy don't exist. I'm putting the template back. Pstinchcombe 21:08, 24 February 2007 (UTC)

I removed the NPOV tag, I feel the article is nonbiased, perhaps the next time you put it back on, you should justify why, you feel its NPOV, the only defense of the policy is lost money to the government. --208.54.14.27 01:52, 22 March 2007 (UTC)

_______________

Just a reader here ....

You write "The burden of computing AMT and the disallowance of deductions for state and local income taxes magnify criticisms of the AMT." and then only expand on the disallowance of deductions, not the burden of computing the AMT.

What's the cost in lost productivity, increased cost of prepared returns, trees wasted as paper? My own experience suggests it adds about 1/3 more pages and at least that much cost to my prepared returns.

Thanks!

_______________

More and more individual taxpayers are falling into what is be called the "AMT" trap. For many taxpayers, the common question is, "How do I avoid AMT". So how do you avoid AMT, simple have less tax preference deductions on your Schedule A. The biggest tax preference item on your Scedule A is state income taxes and real estate taxes. In any given year, if your Alternative Minimum Taxable Income (AMTI) is greater than your Regular Taxable Income, you may want to push your last real estate tax payment and state estimated taxes into the upcoming year. If the upcoming year is projected to have more income than the current year you should do it since there would be no tax benefit in the current anyway.

For more information about AMT contact Brian McGovern at www.mcssllc.com.

_______________

The following appears to be a collection of subordinate clauses and prepositional phrases: "For example, if an asset (stock or bond) holder would pay less taxes than they would lose in value if they were to hold a losing stock until you can balance the sale of the money losing stock with the sale of a money making stock during the same tax year. " I am unable to identify the subject and predicate here. "A verb, Senator Kennedy... We need a verb." - Gary Trudeau

131.81.200.158 15:06, 22 November 2006 (UTC)

figure

I just added a figure and would love comments on it. If anyone can see errors in my calculation or wants to see changes you can either make them (I've included the code, and you can edit it are run it in the GPLed statistics programing language called R) or you can make comments and I'll try to incorporate them. Pdbailey 18:11, 22 March 2007 (UTC)

recent edit by 134.173.152.125 in ``Arguments against repealing the AMT

134.173.152.125 just removed "Repealing the AMT would be decrease revenue more than repealing income tax itself." [1] with a edit comment that, "mis-cites source, absurd conclusion." The Washington Post writes, "By 2008, it would cost the Treasury considerably less to repeal the ordinary income tax system than the alternative minimum tax, according to the Tax Policy Center, jointly run by the Brookings Institution and Urban Institute." I think this is a reasonably faithful reproduction of the claim, am I missing something? Pdbailey 00:42, 28 March 2007 (UTC)

Does anyone agree with the edits of 134.173.152.125? It's been a few days and I've gotten no response so I'm tempted to add the text back.Pdbailey 12:21, 29 March 2007 (UTC)

I read the source and do think that it is worth having in the article, however, it needs to state that this is the opinion of the Tax Policy Center. Morphh ^(talk) 13:06, 29 March 2007 (UTC)

I was confused because of the wording. I read "income tax itself" as equaling non-AMT tax plus AMT tax, since AMT is a part of the total income tax revenue. With that interpretation of the wording, it doesn't make sense that repealing AMT (a part of income tax) would cost more than repealing the entire income tax system. I support the re-inclusion of the text so long as it is reworded to avoid ambiguity. Perhaps it could say something like "Repealing the AMT would decrease revenue more than repealing the ordinary (non-AMT) income tax system." —The preceding unsigned comment was added by 134.173.152.125 (talk) 21:01, 2 April 2007 (UTC).

I think what would be best is if you read what is on the page now and raise concerns here. Pdbailey 23:39, 2 April 2007 (UTC)

I suggest the sentence in question be remove again. Washington Post article did not provide a reference link back to the original research it sites so I could not determine how that conclusion came about. My problem is not with the accuracy of the statement "...considerably less to repeal the ordinary income tax..." but without explaining what happens when oridinary income tax is repealed, it may lead to wrong conclusion. Here's one version of what may happen when ordinary income tax is repealed.

Before the repeal, people pay ordinay income tax.

After the repeal, some pay AMT which is more then their ordinary income tax. The rest pays no tax since they are below the AMT bracket.

The result is considerable less people are paying taxes but they have to pay more of them. Net result is a loss of $X tax revenue for IRS but this amount is more if AMT was repealed instead. But the hidden truth is the extra cost is now being bared by middle class tax payers.

The above is just one possible ways to calculate the cost of repealing ordinary tax. I do not know what calculations were used by Tax Policy Center to draw its conclusion and that's what I have a problem with.NYCDA 18:38, 21 September 2007 (UTC)

The statement "Repealing the AMT would be decrease revenue more than repealing income tax itself" is technically correct but highly misleading. The problem centers on the dual meaning of AMT. AMT is technically the excess between Tentative Minimum Tax (TMT) over the regular tax. But most of the time people use the term AMT for both AMT and TMT, leading to much confusion. If you were to retain the TMT and zero out the regular tax, revenue would at some point drop more than if you were to retain the regular tax and zero out the TMT. But in the former case ("Repealing the AMT"), the AMT line on your 1040 would skyrocket, changing from a relatively small add-on tax into your entire tax liability. Because of the structure of the calculation, repealing the regular tax and "leaving the AMT unchanged" would not leave the AMT liability unchanged. Far from it. Instead, it would create a huge increase in AMT liability, in the amount of the entire regular tax liability for all of today's AMT taxpayers. It's not the case that today's aggregate AMT liability is anywhere near aggregate regular tax liability. A statement that "Zeroing out the TMT would be decrease revenue more than zeroing out the regular income tax liability" would be accurate without being misleading, except that very few people have any idea what the TMT is. By the time they understood what the TMT was they would no longer be stupefied by the claim. Pdbailey was wise to be skeptical.AMTbuff 23:57, 14 November 2007 (UTC)

arguments against

An anonymous editor just removed the emphasized portion of , "While many parties agree that the AMT needs to be changed, some argue against its outright repeal. The Center on Budget and Policy Priorities states that because households with annual incomes above $200,000 are the source of more than half of all AMT revenue, more than half of the benefits of repeal would go to high-income households. In addition, they state the cost of repeal is prohibitive," without comment. I'd suggest it is a regression and the original text before the edit should be reinstated. Anyone else have an opinion, or does the anon. editor want to explain the edit? Pdbailey 02:43, 28 May 2007 (UTC)

I think the article was so far better before that the edit may or may not have been vandalism, so I did the rv after 24 hours of no comments. Pdbailey 03:57, 29 May 2007 (UTC)

My RV was just RVed by 146.209.130.1. based on a glance at that editors other edits, it isn't primarily a graffiti account, so I'll take it as an awkward edit in good faith. I requested comment from that editor and await it here for at least 24 hours. But anyone who can say why removing that section is welcome to comment.Pdbailey 18:19, 29 May 2007 (UTC)

I'm not sure why it was removed but validating the data and finding a source for it would be a first step. It might have been better for them to add a {{fact}} tag but it appearrs the editor thought the information to be untrue (or perhaps just a bias statement). Morphh ^(talk) 22:22, 29 May 2007 (UTC)

Did you read through the reference provided? I think it's quite clear. If you disagree, maybe there's something here. Pdbailey 22:37, 29 May 2007 (UTC)

Ahh didn't notice that it was after the next sentnece. I'll try to have a look later but my initial thought was that it was unsourced. Morphh ^(talk) 23:22, 29 May 2007 (UTC)

Reforming the AMT

What do you think of a new section on proposals to reform the AMT? Several policy groups on both the right and left have offered solutions, and it might be helpful to sketch these since it's becoming a bigger issue. RS102704 15:29, 26 July 2007 (UTC)

Makes sense. Morphh ^(talk) 15:41, 26 July 2007 (UTC)

Rambus Engineer Suicide

Do we really need the teer-jerker tale of an engineer at the Rambus corporation's suicide? It doesn't take a genius to realize that this suicide was totally about the fact that Rambus stock plunged when it became clear that Rambus wasn't going to be allowed to shove the overpriced, under-performing RDRAM standard down consumers throats by banning DDR and persecuting motherboard makers who enabled 133MHz SDRAM. Doesn't anyone else remember the performance and cost issues with RDRAM? In any case, the suicide wasn't about a tax liability so much as it was about a decision to: 1. Quit his job at age 53, which he called retiring. (A dozen years early) 2. Hold onto a stock thinking it would keep skyrocketing in value. 3. Completely ignore the fact that he could be totally bankrupt and still have A DEGREE FROM M.I.T. -and- an awesome resume. He had a lot to keep living for. His suicide wasn't caused by a tax law, it was caused by low self-esteem, a failure to realize the value of his personal assets that couldn't be taken from him, and some really bad stock decisions that wiped out his dream. — Preceding unsigned comment added by Zaphraud (talk • contribs) (30 July 2007).

I removed the section because the logic was not strong, and it was labeled "recent" but was clearly over 5 years old. Pdbailey 13:24, 31 July 2007 (UTC)

Arguments against - neutrality

Arguments against APPEALING; I typed the link wrong.

I added a pov tag to this section. Arguments like "More than half of the AMT is paid by those with income over $200,000 per year, helping make the overall taxation system more progressive." imply that progressive taxation is good, so some people just support it as a means of progressive taxation; it isn't even an argument for keeping the AMT. That statistic should probably be moved somewhere like Taxpayer incomes. 171.71.37.207 18:10, 27 August 2007 (UTC)

I agree that the arguments appeal to partisan sentiments, but I think both sections are that way. Examples include concern for double taxation (Think about it, many american pay (1) income tax (2) sales tax, that's double taxation too). Another one of the prorepeal arguments talk about howmany people will have to pay it, what's that got to do with anything. I strongly disagree with the neutrality tag and propose it's removal. Pdbailey 19:09, 27 August 2007 (UTC)

In that case, both should get cleaned up. I agree that double taxation isn't really a valid criticism. Moreover, I'd support changing these (in Criticisms) to:

• The Congressional Budget Office estimates that in 2006 34.6% of taxpayers in the $50,000 to $100,000 AGI range will owe AMT (if the "patch" law is not applied again).[9], and 11 percent of all tax payers will owe the AMT.
• The IRS estimates that by 2010, 34% of all individual filers who pay income tax will be subject to the AMT

to

• The AMT has expanded far beyond its intended purpose--taxing a small number of high-income households--having recently (2006) affected 34.6% of taxpayers in the $50,000 to $100,000 AGI range.

171.71.37.207 19:52, 27 August 2007 (UTC)

171.71.37.207, I disagree that because you have to have a private sentiment about something to appreciate an argument for or against something that implies that it shows POV. Maybe it would help if you pointed to the portion of the POV section that says this. Pdbailey 03:49, 28 August 2007 (UTC)

So in the example I pointed out, "More than half...," it was actually two facts, not an argument, or a fact that <person> argues <point>. Reading the source, the information is presented as facts (which they are). It doesn't try to argue anything, mainly talk about facts and dispel myths. In hindsight, maybe an OR tag would have been better. Correctly cited, I would rather see something like "Some wish to keep the AMT as it implements progressive taxation," but that contradicts "The AMT amounts to a flatter tax." Maybe the rebuttal "Since more than half of the collected AMT is from those with > $200,000 income, its effect on those with lower incomes is small" is better. 171.71.37.207 20:24, 28 August 2007 (UTC)

I agree with you in concept, but I think the execution changes the implication in the exact opposite way, and I agree with you about the best solution. BTW, flatter is more about those who are affected by the AMT, which could mean more progressive if richer people otherwise would have lower taxes. Pdbailey 02:11, 29 August 2007 (UTC)

I don't expect my change to be gospel, by any means. It was more about removing OR. Please add, modify, undo, etc., provided there are sources behind it. The article on proportional tax says that a flat tax is a tax that is neither progressive nor recessive. I have no idea what the AMT does, there, just that two arguments contradicted each other. I may very well have removed the wrong one. 171.71.37.207 18:15, 29 August 2007 (UTC)

Well, it's a bit of both. The AMT is mostly flat, but it: 1) doesn't apply to people making below its threshold, so is progressive in that sense; and 2) is mildly progressive even above its threshold since the rate for AGIs above $175k (28%) is slightly higher than that for AGIs below $175k (26%). --Delirium 15:33, 22 October 2007 (UTC)

34% of all filers

I just removed the following, "The IRS estimates that by 2010, 34% of all individual filers who pay income tax will be subject to the AMT." because it doesn't have a reference. Please provide one before including it again. Pdbailey 15:59, 30 August 2007 (UTC)

Arguments in favor of the AMT

I edited the reference to the AMT serving to flatten the tax burdens amongst taxpayers. The comment made it appear that the AMT increased the "simplicity and apparent fairness" of the tax code. While certain flat tax proposals would make for a simplified taxpayer experience, the AMT actually adds complexity. 128.192.120.180 19:32, 1 October 2007 (UTC)

Can someone tell me how/why this argument is presented in favor of the AMT: "More than half of the AMT is paid by those with income over $200,000 per year." So what? How is this an argument? It's simply class warfare. So if someone makes more than $200,000 a year, they should get screwed over and pay a higher percentage AND higher total amount in taxes?

If this statement remains, how about we add the inverse to the "in favor of repealing" list: Less than half of the AMT is paid by those with incomes less than $200,000 per year. It's equally as pointless.

simplify beginning?

This article is great, and all, but it doesn't succinctly explain right off the bat what the AMT *IS*. It should probably explain this in the first few sentences, but it doesn't, really, it's like, "this is a tax that exists." What about how it is assessed-- shouldn't this go somewhere earlier, too? Lequis (talk) 02:05, 19 November 2007 (UTC)

Good points. I also think the lead is much too long per WP:Lead; anyone disagree? Alice^✉ 03:39, 14 December 2007 (UTC)

You are both right. Also, I'd say pitch the USC references until after the lead. While they are authoritative, they are also inscrutable. Pdbailey (talk) 14:27, 14 December 2007 (UTC)

I have moved most of the Intro into a new section 1. This entry does a good job of summarizing the debate over the AMT, and a very poor job of describing just what the AMT is. I am confident that any tax guide (such as Lasser's) does a good job of explaining to educated lay people just how the AMT works. After all, the AMT is controversial precisely because it now hits most successful business and professional people.

The USC is indeed at once definitive... and inscrutable. That's why this entry should also cite the instructions to 6251, and even a mass market tax guide. This entry includes one reference to the academic literature in economics, Mac Colell et al (1995). This is overkill; very very few readers of this entry could make sense of this PhD level text. You don't cite a textbook on quantum mechanics to explain the difference between AC and DC current! It would be much better to cite any standard undergrad text in public finance, a very applied branch of economics that studies actual and ideal tax systems. An example of what I have in mind is the text by Harvey Rosen.132.181.160.42 (talk) 21:23, 20 December 2007 (UTC)