I just saw on CNN News that Congress passed a law to eliminate the “Alternative Minimum Tax.” Of course, this law will have a couple more steps to go before becoming, well, law. Passing this law has been a campaign promise of John McCain’s as a part of his income tax changes (read his tax plan on www.johnmccain.com).
Anytime we hear of a “tax” being eliminated, we automatically think, “This is a good thing for us, right??!!” Well, since I have had an income tax preparation business for 32 years and know a LOT about taxes, I wanted to tell you what eliminating the Alternative Minimum Tax means for you.
If you are married (and file that way) and make over $200,000, eliminating this tax is going to save you a lot of money! The tax laws give preferential treatment to certain kinds of income and allow special deductions and credits for certain kinds of expenses. The alternative minimum tax (AMT) attempts to ensure that anyone who benefits from these tax advantages pays at least a minimum amount of tax. (I cut and pasted those last two sentences directly off the IRS website.) For those who make over $200,000 and own a business or invest in stock options, you get to “write off” most of your expenses. That means if you make over $200,000 a year, you can actually end up paying a lot less tax than those who make less than $60,000 a year. The Alternative Minimum Tax is a tax to make sure that those who make over $200,000 a year and are entitled to all those deductions will have to pay some tax–essentially a “minimum” tax.
Now the majority of you who I am sending this to probably make a whole lot less than $100,000 per year, let alone $200,000. I just think you should know that when those who support eliminating this tax get it passed, the rich (I consider those who make $200,000 a year or more rich but maybe you define it differently) will once again get away with not paying any income taxes, or very little.
I wanted to share my knowledge with you, not to push my own political agenda, but to educate you in this one area that I have expertise in. Both our presidential candidates have their income tax plans (as well as their plans on other issues) on their websites and I encourage you to go there and read whatever issues interest you. I don’t think many of us will vote on how a candidate feels about just one issue, but in the end, I do think we all have a responsibility to learn exactly what we are voting for.
Deb Peterson
Affordable Tax Service
Goshen, IN
574-534-6861
1 response so far ↓
JT Thomas // October 24, 2008 at 5:38 pm |
The “rich” are the ones who pay most of the taxes in our country. The wealthiest 1 percent of the population earn 19 percent of the income but pay 37 percent of the income tax. The top 10 percent pay 68 percent of the tab. Meanwhile, the bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes. These are proportions of the income tax alone and don’t include payroll taxes for Social Security and Medicare.
The Tax Policy Center, run by the Urban Institute and the Brookings Institution, recently studied payroll and income taxes paid by each income group. The richest 1 percent pay 27.5 percent of the combined burden, the top 20 percent pay 72 percent, and the bottom 20 percent pay just 0.4 percent. One reason that the disparity in tax shares is so large is that Americans in the bottom quintile who have jobs get reimbursed for some or all of their 15 percent payroll tax through the earned-income tax credit (EITC), a fairly efficient poverty-abatement program.