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
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:
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!
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.