Why The Alternative Minimum Tax Should Be Wiped Out
By Justin Gardner | Related entries in Law, MoneyIt’s ruining people’s lives.
Rita and Arthur Miller used to believe that honesty, hard work and filing taxes on time would keep you on society’s good side.They believed this until about 2001, when, in the parallel universe known as the alternative minimum tax, the government began seeking more than $100,000 in tax on income that the couple never received.
Six years later, the amount has doubled, and the couple will probably have to liquidate their retirement savings and maybe sell their townhouse to pay the bill. In a little-noted epilogue to the dot-com boom of the 1990s, the Millers are among thousands of families that the Internal Revenue Service says owe tax on phantom stock-market riches.
They’re getting taxed for earnings they never earned? Done and done. No more.
Read the whole story and tell me if you think it’s fair.
This entry was posted on Monday, March 19th, 2007 and is filed under Law, Money. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
March 20th, 2007 at 12:40 am
I don’t think we should throw out the baby with the bathwater. There should be a much higher floor for this kind of tax.
Example: William Clay Ford, I am sure has hundreds of millions invested in Ford stock which he will never sell. His net paper profits should be taxed because he can afford it. However, if he suffers a loss over a year, he should also be able to claim that loss all at once on his return.
The system definitely needs fixing. In this case, the IRS is screwed up again because you can’t sue a tax preparer for errors. And their Tax preparer is more responsible fo0r their plight than the IRS.
March 20th, 2007 at 8:03 am
It certainly doesn’t help that the Bush tax cuts reduced regular tax liability, pushing more people below the cutoff where the AMT kicks in. The irony is so…ironic.
A rational first move would be to peg the AMT to inflation, otherwise as inflation and nominal incomes rise more & more middle-class taxpayers will fall within the AMT’s static bracket. The AMT is now strangling an entirely different class of taxpayer than it was intended to affect.
March 20th, 2007 at 10:47 am
Wow, these people got some exceptionally shitty advice from their broker as well as their tax preparer. I seriously wonder if they could sue. The first rule of investing is diversify. These people were in their 50’s and they’re getting advice to leave 90% of their paper wealth in one high risk company.
As for the AMT, definitely broken and needs to be fixed yesterday.
March 22nd, 2007 at 6:43 pm
Their financial adviser should be sued, then shot. Then sued again.
However, this isn’t a problem with the AMT. Taxing people on exercised options really isn’t unreasonable. Their problem is, they didn’t put aside the money to pay the taxes when they exercized the options.
Whenever you realize a taxable event, you should ALWAYS put aside the money to pay those taxes.
Frankly, the AMT isn’t that unfair a system.