News From The Tax Zone

In my office, where I am gently if repeatedly chided for my Democratic membership (and therefore my desire to give away rich people's money) I am also the source for all info about what the Dems are going to do, or the reasons for why they aren't.

We talk alot about The AMT. If you own a home and like to give healthily to charities you may very well have been hit by the AMT. Or you will be hit soon (probably next year).

The Dems are looking for away to tackle the issue.

Democrats Seek to Lead the Way in Tax Overhaul
By EDMUND L. ANDREWS
WASHINGTON, April 8 — House Democratic leaders, in an effort to upstage Republicans on the issue of tax cuts, are preparing legislation that would permanently shield all but the very richest taxpayers from the alternative minimum tax, which is likely to affect tens of millions of families as early as next year if it is left unchanged.

...The alternative minimum tax was created in 1969 to prevent millionaires from using loopholes to avoid all federal income taxes. Under it, affected taxpayers have to do a second tax calculation without claiming popular deductions like those for state and local taxes that they have come to rely on. It is akin to a flat tax of 26 to 28 percent.

But the tax is expanding at a rapid pace, partly because it is not adjusted for inflation. It can hit people with incomes as low as $50,000 and if left unchecked is expected to affect 23 million households during the 2007 tax year, up from 3.4 million last year.

...
Bewildering to calculate and capricious in its impact on individuals, the alternative minimum tax requires taxpayers to perform a second calculation of their tax bill, on top of their regular tax calculation, that erases personal exemptions, the child tax credit and widely used deductions like those for state and local taxes.

The reach of the alternative tax is expanding rapidly, for two main reasons. The first is that the tax is not indexed for inflation, which means that more people fall into its maw as nominal incomes rise. But an equally important reason stems from Mr. Bush's tax cuts of 2001 and 2003. The cuts lowered taxes under the regular tax, but were not applied to the alternative calculation. As a result, the alternative tax bill is higher than the regular tax bill for millions of additional people.

After his re-election in 2004, Mr. Bush vowed to overhaul the income tax and abolish the alternative minimum tax as part of the process. But even though he received recommendations from a handpicked advisory panel, Mr. Bush ignored the proposals and never came out with a plan of his own.