Dear “Member of Congress”:
The irresponsible behavior of Congress with regards to the dreaded Alternative Minimum Tax, described by a colleague as “the poster child for complication, frustration, indiscriminant penalization, and a disregard for the best interest of Americans”, is unacceptable and inexcusable!
As Professor James Maule pointed out so well in his law blog, “The problems with the AMT are not new and did not surface yesterday. The problems have been growing during the past few years, and they were predicted by tax experts even earlier. The need to repair the AMT is not an emergency like the devastation of a hurricane. It is not sudden and unexpected. It is not the product of uncontrollable nature but the result of bad planning and design by the very institution, the Congress, that now stumbles to clean up its own failures.”
Your failure to act responsibly will, when the promised temporary fix is finally passed, cause the Internal Revenue Service to unnecessarily waste millions of tax dollars and will seriously delay the processing of 2007 federal income tax returns and the issuance of 2007 federal income tax refunds. This delay will cause many, many thousands of lower-income taxpayers, who can least afford it, to fall prey to usurious Refund Anticipation Loans pushed upon them by unethical tax preparation companies.
I have been preparing 1040s in New Jersey for 35 years. I would characterize the bulk of my practice as being members of the middle and upper middle class. During the first half of my career I never prepared a return on which the client paid the dreaded Alternative Minimum Tax. During the past few tax seasons at least every 5th return is hit with this additional tax, and I check for AMT on probably every other 1040 “long form”.
Unfortunately, Congress has been using the increasing income generated by this despicable parallel tax, unadjusted for inflation, to pass tax cuts, which have misled my clients into thinking that they would be saving money while in reality they end up paying more via the “back-door” AMT.
The Alternative Minimum Tax as it now exists no longer does what its predecessor, the original Minimum Tax, was created to do. Len Burman has written in an article titled “The Alternative Minimum Tax – Assault on the Middle Class” in a recent issue of the “Milken Institute Review”, “Remember the political embarrassment the AMT was meant to eliminate – those 155 high-income earners who paid no tax. In 2005, 711 returns reported incomes of over $1 Million without any tax liability.”
The very existence of an Alternative Minimum Tax is an excellent example of the laziness of the Congress. When the issue arose that excessive “loopholes” were causing some high-income taxpayers to avoid paying any federal income tax, instead of closing the loopholes and fixing the Tax Code the reaction of Congress was to provide a “quick fix” with a Minimum Tax.
There is no question that a temporary “fix” for the Alternative Minimum Tax for tax year 2007 must be passed immediately. Get off your arse and just do it!
For the future, it is obvious that the solution to the problem of the Alternative Minimum Tax is to abolish the add-on tax altogether and not just temporarily fix it every few years. But to do this the “regular” tax needs to be properly “fixed”. I have written in my blog THE WANDERING TAX PRO that “this would require too much work on the part of a Congress that needs to spend more of its time and energy raising money and running for re-election than it does on actually doing what they were elected to do!” Please prove me wrong and do away with the AMT properly early in 2008.
Very truly yours,
Robert D Flach
Please get your letter off to your Congress-persons ASAP!
BTW - the Senate passed its version of a military tax relief bill - the Defenders of Freedom Tax Relief Bill of 2007 (S. 1593) – last Wednesday. It is different from the one previously passed in the House – so there is a need for compromise. Kay Bell of DON’T MESS WITH TAXES discusses the bill in her posting “Military Tax Relief Approved by Senate”.