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I was going to bury President Obama in critism, not praise him. That was until I fully read the what exactly what was in the deal that was just struck. Now, I am with the tax the rich crowd, even though this cost me a lot in taxes.

See, I am salary rich, not capital rich, there is a difference. Especially when we start to figure in the Alternative Minimum Tax paid by way to American households, then according to the IRS I am one of the richest men in America. Or at least I am taxed like one circa 1955.

This tax was originally started during the Vietnam War due to the fact that a lot of high-income citizens were gleefully dodging taxes when we need revenue badly to pay for bombs and so forth.

Now I am very definition of a tree-hugging hippie when it comes to war, but I am all for all of us paying our fair share if we decide to invade some other country. Sort of like today.

This is going somewhere, I promise, so meet me below the fold.

For those not familiar with the Alternative Minimum Tax, here is a good primer.

How did the Present Alternative Minimum Tax come into Existence?

By Bonnie Goodman
http://hnn.us/...

Why are more and more people having to pay the Alternative Minimum Tax (AMT)? And what is it? This controversial tax was enacted as part of the Tax Reform Act of 1969 to target the rich. But because the rates were not adjusted for inflation, it now targets not only the rich but also the middle class, and there seems to be no end to the problems its causes. The New York Times reported that "by 2010, nearly 30 million taxpayers will be hit -- among them, a staggering 94 percent of married filers who have children and make $75,000 to $100,000." The Alternative Minimum Tax was designed as a parallel tax system to the federal income tax and checks it to ensure that that the people in higher tax bracket don't evade paying any taxes through loopholes.

With the AMT most tax deductions are disallowed. In 1969 the minimum tax was a 10 percent flat rate. Over the years the AMT has evolved to also include a corporate AMT; with each tax reform effort from the Carter to Clinton Administration the AMT has increased. As of the latest revision, which was passed in 1993, there is a two tier system: 26 percent and 28 percent for individuals.

For those who prefer the Wiki, in none leaking format:
http://en.wikipedia.org/...

Now, not being adjusted for inflation was a bit of foolishness.

If you made $33,750 in 1969, you were doing well. If you made $33,750 in 2010, well, hopefully you are getting by.

Funny thing is, that would still be the cut off for the "Rich Man's Tax" if we had not gotten the AMT patch that President Obama just got the Republicans to agree to. Not sure if the trade off to the rich was worth it, but roughly 28 million households would have been taxed at 26% above the cutoff of the AMT if this had not been done.

There would have been massive howling come April as millions upon millions of middle class taxpayers suddenly found out they were millionaires and were now required to pay taxes like a plutocrat.

Not to mention that at 26%, these middle class taxpayers would be paying 11% more than the paltry 15% capital gains tax that just got extended.

So there's that.

But what struck me as the nugget is this hidden gem in the CBO Director's Report. President Obama has decided to help out the middle class in a way that not even former Presidents Clinton or Carter ever dreamed of doing.

He is going to tie the AMT to inflation! This is going to be expensive, but is actually one of the most progressive tax reforms in recent history.

I kid you not!

http://cboblog.cbo.gov/...

By far the largest budgetary impact would stem from the President’s proposals to index the alternative minimum tax (AMT) for inflation and to extend various tax provisions contained in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). Over the next 10 years, those policies would reduce revenues and boost outlays for refundable tax credits by a total of $3.0 trillion.

So while we grab our pitchforks over the billions that President Obama is giving to the ultra rich, he has just silently given the middle class of America a $3.0 trillion dollar tax break.

Say that with me, a $3.0 trillion dollar tax break for the Middle Class!

This will keep countless American households from paying the Millionaire's Tax and has to be an achievement for which he is applauded.

If you read my comment history, you will find that I am often a very harsh critic on President Obama's policies. But today, I praise him.

Now, if he could just figure out a way to tell everyone what he has done, that would be great.

Originally posted to Patience John on Tue Dec 07, 2010 at 08:55 PM PST.

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Comment Preferences

  •  Do You Praise (4+ / 0-)

    the payrolll tax cut, and the resulting necessity of making up the shortfall from the general fund, and the ability of the GOP to use this as an excuse to cut social security as adding to the defecit?

    •  I hope this tax holiday has a set (0+ / 0-)

      expiration date and is non-renewable.  I'm not sanguine.  And I'm not sure why Ezra Klein said it was a progressive tax cut.

      "Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity." --M. L. King "You can't fix stupid" --Ron White

      by zenbassoon on Tue Dec 07, 2010 at 09:01:31 PM PST

      [ Parent ]

      •  Zen (1+ / 0-)
        Recommended by:
        The Moonlit Knight

        I have disagreed with you on here, mostly in regard to support of the president's style/political policies.

        But I know that you are a well meaning person.

        I think it's just a matter of time before you come to terms with the fact that we have been betrayed.

        •  So are you against tying AMT to inflation? (0+ / 0-)
          •  Reading the Information Above (2+ / 0-)
            Recommended by:
            khereva, Patience John

            ...I have no problem with that (even though I am in the tageted group). but my comment is in regard to social security.

            •  Did he extend the AMT Patch, or actually deal to (0+ / 0-)

              and get them to agree to index it to inflation? That's the critical question and I don't recognize the answer exactly in the diary.

              For the lucky few who have never met it, The Alternative Minimum Tax is a form of tax which recomputes your ordinary return to delete a series of what the framers of this considered to be excessive deductions available under certain circumstances or in some states. NYState has a number of very expensive taxes deductible on the W2 but which are required to be added back in the AMT calculation, Medical expenses are also among the items which will be eliminated or reduced in AMT calculations. The tax is very punishing on taxpaers who live in high State tax states, or who have higher deductions for some of the ones available on the W2. Inflation in the economy but not in the amount at which the obligation kicks in has brought down the level at which AMT must be filed to sums that are double poverty or therabouts, depending on family size. For a number of years, people have talked about repealing AMT or indexing it, but the only patches I remember were year to year patches which said it would not necessarily be in effect for tax year X.

        •  I still think Clinton was a great President. (3+ / 0-)
          Recommended by:
          DBunn, second gen, science nerd

          so I guess I'm not a "real liberal"

          I'm not giving up.

          "Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity." --M. L. King "You can't fix stupid" --Ron White

          by zenbassoon on Tue Dec 07, 2010 at 09:10:06 PM PST

          [ Parent ]

        •  Yeah, c'mon Zen, we don't wanna be Obama's (1+ / 0-)
          Recommended by:
          Christy1947

          friend anymore. Let's go to the playground without him.

          I love that a site that once had collective intelligence is now just playing "Mean Girls" and trying to get all their friends to write stuff about Obama in their "Burn Book".

          Rand Paul- He won't let you down. His supporters won't let you up

          by second gen on Tue Dec 07, 2010 at 09:45:06 PM PST

          [ Parent ]

      •  AMT reform use to be a Democratic Party goal, (6+ / 0-)

        but got lost in the shuffle during the Bush Years.

        President Obama is doing what countless liberal Democrats have wanted to do for a long time, tie AMT to inflation.

        Can we at least stop the 2 Minutes of Hate long enough to say, hey, good job on that part?

    •  Nope, you nailed it earlier with the camel (0+ / 0-)

      analogy.

      But I do see what he did here.

  •  It could (3+ / 0-)
    Recommended by:
    science nerd, vahana, Patience John

    be like the TARP all over again. You never know. Wildly unpopular with everyone, and yet surprisingly effective. Credit where credit is due, I think TARP was one of the few sensible things to come out of the Bush presidency.

    Now, how can we get those highest income earners to pay back their tax cuts when the recession ends...

    So...why can't we have a benevolent progressive dictator again?

    by JMS on Tue Dec 07, 2010 at 09:07:41 PM PST

    •  15% Capital Gains tax is ridiculous. (3+ / 0-)
      Recommended by:
      Chgo Jim, second gen, Ana Thema

      I'd even go as far as unpatriotic during a time of war and economic turmoil.

      The best thing we can do is make the elite invest in production capital instead paper capital to get their precious tax rebates.

      You know, herd the cats in the general right direction.

      •  Also, the "Death Tax" meme is an insult to (2+ / 0-)
        Recommended by:
        Ana Thema, Patience John

        those who actually work for a living, rather than "clipping coupons" (back when bonds actually had coupons attached for accrued interest, and you had to submit them to get paid).

        The purpose of the Inheritance Tax is to collect the lifetime's worth of deferred capital gains taxes before resetting the basis for the inheritor to current market value. They want to reset the basis without paying up. Pure fountain pen robbery and crocodile tears.

        Busting the Dog Whistle code.

        by Mokurai on Tue Dec 07, 2010 at 09:53:37 PM PST

        [ Parent ]

  •  From when is the inflation adjustment calculated? (1+ / 0-)
    Recommended by:
    agent

    If AMT is payable on $33,750 and up, and the inflation adjustment kicks in on Jan 1st, say, it'll take a long time to make a difference.  Or does the adjustment kick in as of some past date?

    We must, indeed, all hang together, or assuredly we shall all hang separately. B. Franklin

    by Observerinvancouver on Tue Dec 07, 2010 at 09:19:26 PM PST

    •  We'll see when it comes out in the final form. (2+ / 0-)
      Recommended by:
      agent, Observerinvancouver

      I am sure that start date will be in much debate once the Republicans realize what is going on here.

      I think they got so greedy with their elite tax break and payroll tax gambit, they did not see what Obama did here.

      In 1986, it was $30,000 for a single filer. So that's roughly $58,000 in today's money.

      I mean, how can the Republicans go against wait Saint Reagan did?

  •  John the history of the AMT (3+ / 0-)
    Recommended by:
    agent, Ana Thema, Patience John

    This was another example of legislative over reaction. The AMT was put in place (without an inflation adjustment) because 146 high income taxpayers paid no federal income tax. Through the use of tax exempt municipal bonds, and tax sheltered investments available before 1986, they had eliminated their federal income tax liability for a single year. To think of the millions of hours spent on the AMT, now impacting the middle class, because 146 taxpayers paid no federal income tax makes you wonder just what was Congress thinking (or not) at the time?

    "let's talk about that"

    by VClib on Tue Dec 07, 2010 at 09:24:12 PM PST

    •  Hey, I am with you on this. (1+ / 0-)
      Recommended by:
      Ana Thema

      But until we get a reform on the capital gains tax, the AMT is to much of the pie to get rid of without blowing the budget out of the water.

      The 10 year treasury went from 2.94% to 3.16% today, people are starting to get spooked if we can ever pay back out debt.

      I'd get rid of this tax all together if I knew it didn't mean us defaulting on our debt because the rich refuse to pay their fair share.

    •  Many taxpapers meet it these days when they (0+ / 0-)

      sell houses. It has a preferential treatment for CG, if you can get through the form.

  •  interesting (2+ / 0-)
    Recommended by:
    jan4insight, Patience John

    I had not heard of this before. Thanks for posting.

    •  I found it researching out how bad of a deal it (2+ / 0-)
      Recommended by:
      agent, Ana Thema

      was. Still not happy with the overall product, but this a ray of sunshine in a fiscal shitstorm.

      And also, the Obama Administration is horrific at messaging, so I am not surprised people don't know.

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