As you no doubt know, the right wing is screaming about the Alternative Minimum Tax (AMT), and how it's unfair that, because it is not inflation indexed.
You know the right wing patter: It's awful!!! It's unfair!!!!! It's.....exactly the same sort of flat, no deduction tax that those idiots have been endorsing for years.
That's not to say that there aren't flaws to the AMT, certain income, like capital gains, are not subject to the AMT.
Being an engineer, I figured that I'd run some quick numbers, and here is a proposed update to the AMT.
The basic thesis is as follows:
- ALL income is to be counted against the AMT.
- It will be indexed to the 90th percentile of total income.
- There will be NO deductions.
- The marginal rate shall be computed on multiples of the 90th percentile number up to a limit (right now let's do 40%)
(more below the fold)
The
November 2003 BLS wage statistics list the 90th percentile wage as $67,330. If we make a SWAG add estimates for unearned income, and inflation, we're probably around $75,000/year.
Using the formula above, there is no AMT at $75,000, a minimum payment of $750 for a $150,000 income, a minimum tax of $2,250 for someone making $225,000.
The numbers should run as follows:
At $500,000/year, half a million dollars, the total payment would be $14,250, the AMT marginal tax rate (the tax on the last dollar earned) would be 5%, giving a total tax rate of 2.85%.
At a million a year, it would be $67,250.00 in taxes, a 14.00% marginal rate, and a 6.73% total tax rate.
At two million a year, it would be $282,500.00 in taxes, a 28.00% marginal rate, and a 14.13% total tax rate.
At three million a year, it would be $ $639,000.00 in taxes, a 40.00% marginal rate, and a 21.3% total tax rate.
At four million a year, it would be $1,039,000.00 in taxes, a 40.00% marginal rate, and a 25.98% total tax rate.
At five million a year, it would be $1,439,000.00 in taxes, a 40.00% marginal rate, and a 28.78% total tax rate.
You have to get to a million dollars a year before your minimum tax payment even comes close to 7% of your total income..
The Republicans will scream and howl and claim it's "class warfare".
We should claim that it's about making steroid abusing atheletes pay their fair share.