The Alternative Minimum Tax was established to catch those very few wealthy individuals who slip through the cracks of the tax code. As American incomes grow, more and more people are getting snared by this complex and convoluted tax. The AMT has become a major concern for entrepreneurs as many are unknowingly getting snared in its web.
Last month I wrote about a possible change in the wind for the Alternative Minimum Tax. A report from the Tax Foundation found that some Congressional districts are being hit by the AMT harder than others -- and interestingly many of those districts are represented by Democrats. As a result, House Ways and Means Chairman Charles Rangel (D) made reforming the AMT a top priority for this year.
Now it seems that Democrats may be looking to traded the AMT for higher taxes on the upper income brackets. But as James Pethokoukis at U.S. News & World Report argues, that is just not necessary:
Then again, how about just repealing the AMT and then, well, that's it? As budget analyst Chris Edwards of the libertarian Cato Institute notes, government tax revenues in the first four months of this fiscal year are coming in at almost twice the predicted rate. If that keeps up, the government will take in an extra $108 billion this year, more than enough to pay for a $40 billion to $50 billion fix for this year.
The economy is improving -- let's not through cold water on it with higher taxes. Many in Washington have a misguided mental image of high income people -- they are mostly corporate fat cats or rich kids who inherited their wealth. The truth is that more an more wealth is being generated on Main Street by successful entrepreneurs -- the same entrepreneurs who now generate 50% of the GDP and 78% of all new jobs. Let's not continue to punish them for their efforts and successes with hidden land mines like the AMT.
