Dems Will Hit the Rich to Fix the AMT

The Alternative Minimum Tax (AMT) was created to punish certain very wealthy individuals who thanks to various tax shelters and careful planning (within the tax laws) managed to avoid paying any federal taxes at all. That wasn't considered "fair" so Congress enacted the AMT to make sure they paid something.

There was a major flaw in the AMT bill - it wasn't indexed for inflation. Consequently, every year more and more people with lower incomes find themselves subject to the AMT and within a short time, millions of taxpayers who wouldn't be considered rich will find themselves paying a punishing tax.

The Dems know they have to fix this, and their solution as always is to tax the rich:

House Democrats looking to spare millions of middle-class families from the expensive bite of the alternative minimum tax are considering adding a surcharge of 4 percent or more to the tax bills of the nation's wealthiest households.

Under one version of the proposal, about 1 million families would be hit with a 4.3 percent surtax on income over $500,000, which would raise enough money to permit Congress to abolish the alternative minimum tax for millions of households earning less than $250,000 a year, according to Democratic aides and others familiar with the plan.

Rep. Richard E. Neal (D-Mass.), chairman of the House subcommittee with primary responsibility for the AMT, said that option would also lower AMT bills for families making $250,000 to $500,000. And it would pay for reductions under the regular income tax for married couples, children and the working poor.

The biggest problem with the tax code is not the AMT, but the fact that nearly 50% of all wage earners don't pay any federal income taxes at all. With such a huge percentage of voters having no financial stake in the tax code, the burden will just fall more and more on the producers in the country while millions of others make no contribution at all. The so-called "fair" tax, or flat tax, would be a much better option because it would give everybody a vested interest in the tax code, and therefore would make everybody hesitant to allow Congress to raise taxes to fix their overspending problem.