PJ BLOGGER

New Jersey families will be sideswiped by the alternative Minimum Tax (AMT),

In Uncategorized on October 20, 2008 at 11:19 pm

Dear Friends,

In the aftermath of the $700 billion bailout, many Americans are wondering how this exercise in government spending will affect their pocketbooks. No place is this of greater concern than in the state of New Jersey, a state afflicted with unusually high taxes. Among these taxes is the Alternative Minimum Tax (AMT), which is claiming greater numbers of victims among middle class families.

The AMT was created by the Democrat-led Congress in 1969 as a parallel tax universe to ensure that “wealthy” Americans paid income taxes even if they had no income tax liability under the regular income tax system. Taxpayers have to calculate their taxes under the regular tax system, calculate them again under the AMT system, and then pay the higher tax liability. Essentially, the AMT was a net to catch high-income tax avoiders. But, Congress failed to look to the future when it wrote the AMT into law, and today it captures many families firmly in the middle class. Primarily, this is because the AMT is not indexed to inflation, so the income threshold set in 1969 for the very wealthy remains the income threshold for paying the AMT penalty today. To make matters worse, especially for those of us here in New Jersey with a very high state and local tax burden, the AMT fails to allow for commonplace deductions and tax credits, including the deduction for state and local taxes and the home mortgage interest tax credit. About 4 million taxpayers each year are deprived of the various deductions and credits that often save middle class families from stiff tax liability.

Last year, 3.5 million taxpayers were subject to the outdated and burdensome AMT. This year, the AMT will affect a whopping 23 million taxpayers. And, according to the Urban Institute/Brookings Institution Tax Policy Center, if Congress continues to neglect this growing problem, in 2010, the AMT is projected to ensnare 32.4 million taxpayers – 34 percent of them are individual filers. That same analysis shows that 89 percent of married families with two or more children and incomes between $75,000 and $100,000 will be penalized under the AMT. By 2017, these numbers become still more dire: 53 million taxpayers – almost half – will be hit by this tax penalty.

There is no question that this outdated tax must be repealed or at the very least reformed. Up to now, Congress has put in place a series of one year patches to ensure that middle class Americans wouldn’t be enveloped by the AMT.

I’ve introduced the AMT Middle Class Fairness Act which would index the AMT to inflation and allow a state and local tax deduction against the AMT. This is a commonsense approach to the underlying problems of the AMT, and it would go a long way to helping New Jersey families who will be sideswiped by this stealth tax. The real answer, however, is to repeal the AMT. Last year, I joined several of my colleagues to introduce a new approach that would actually eliminate the AMT and restore fairness to the system for middle class America. The Taxpayers Choice Act would make the tax system transparent, simple and efficient.

Congress must make fixing the AMT a priority before it destroys the American middle class. It’s time for Washington starts looking out for taxpayers and their pocketbooks. It’s time for Washington to turn its focus on protecting the family budget, not growing the federal budget.

Sincerely,

Scott Garrett
Member of Congress

BIG TAX INCREASES ON THE WAY

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  1. Garrett wasn’t smart enough to understand why TARP needed to be passed BEFORE $1.3 trillion of market capitalization was wiped out. We don’t need him to go into a long explanation about he will fix the AMT.

    The problem with AMT is very simple. It was never indexed to inflation and so it’s formula doesn’t work in today’s dollars. It is that simple. It is also a tax that we don’t need. Of course the real issue that no one talks about is that Congress doesn’t really want to give up the revenue it generates, because doing so will mean that they have to give up spending in another area or create a NEW tax. So, it just lingers on and everyone complains…but no one does anything. Congress is like a junkie, who needs its AMT fix.

    If politicians like Garrett really wanted to fix AMT, they would just eliminate it and cut spending to cover the lost revenue. If people propose anything short of that, like the AMT Middle Class Fairness Act, you know that they aren’t really serious about dealing with AMT.

  2. 657 since the stupid bailout passed the market has been down huge looks like Garrett was right and your still WRONG!

  3. 657 Dennis check your facts if not for this blog no one would pay any attention to your losing effort of non stop name calling

  4. Actually 7:08, it was the failure of Congress to act quickly and the utter dismay with their collective lack of understanding of the nature and severity of the issues that caused the market to decline when TARP was not passed. Now, in anticipation of the very first purchases, in conjunction with other liquidity policies, we are beginning to see the credit freeze up start to thaw. Congress simply embarassed themselves when questioning Paulson. Too bad we can’t impeach them all for failure to act in the interests of their constituents.

  5. 841 the FACT is the STOCK Market has plumeted since the VOTE ,looks like we have another big goverment failure on the way go Scott!

  6. yes 841 this bailout is like the Fox watching the hen house…

    Top Recipients of Fannie Mae and Freddie Mac
    Campaign Contributions, 1989-2008

    Name
    Office
    Party/State
    Total

    1. Dodd, Christopher J
    S
    D-CT
    $133,900

    2. Kerry, John
    S
    D-MA
    $111,000

    3. Obama, Barack
    S
    D-IL
    $105,849

    4. Clinton, Hillary
    S
    D-NY
    $75,550

    5. Kanjorski, Paul E
    H
    D-PA
    $65,500

  7. Had the bailout not taken place, the stock market would be unrecognizable now, many banks would have failed, and more iconic Wall St firms would have gone under. If you think your 401(k) statement looks bad now, it looks a hell of a lot better than it would have looked without the bailout. If you were under some delusion impression that the bailout was supposed to propell the market back to the good old days, you simply have no understanding about current financial crisis.

  8. sorry 1243 I with 624 the bailout was way to late about 1 year and way to stupid!!! there were easy solutions but they dont cost enough I guess ie….

    1)restore the uptick rule
    2)change the market to market rules
    3) apply sorbanes oxley to everyone including Lehman and Fannie Mea
    4) stop allowing illegal naked sort selling

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