My pal David Kotok of Cumberland Advisors reminds us of the following:
An AMT fix (HR 2318)!
Thank you to Congressmen Andrews and LoBiondo.
June 21, 2007Are you one of the 23 million Americans who are/may be caught in the Alternative Minimum Tax (AMT)? [yes, I am!]
If yes, this could be of interest.
A big preference items that catches folks and puts them in the despised AMT is your state and local income and property taxes. Under the regular federal income tax system, these are fully deductible. Under the AMT they are not.
That means the AMT taxpayers are trapped into paying taxes to three different jurisdictions without the ability to offset one tax before computing the liability on another. The effect of this is to put some taxpayers into marginal brackets much higher than 50%. Furthermore, the AMT works in a way that a simple capital gains transaction can use up the preference allotment and then cause the state and local taxes trigger the AMT. You end up paying capital gains of 28% not 15% because of the effective rate.
Congress created this mess. Congress is responsible for it. Congress can fix it or repeal it.
Two Congressmen deserve praise for introducing a simple fix. They are Rob Andrews (D-NJ) and Frank LoBiondo (R-NJ). They have teamed up to introduce H. R 2318. It amends the Internal Revenue Code IRC) so that the state and local tax deduction is not a preference item in the computation of AMT. It is a two sentence amendment to the IRC. It was introduced on May 15, 2007 and referred to the House Committee on Ways and Means.
Now it is up to the rest of us.
If you live in a state (like NJ or NY or CA) which has high income taxes and high property taxes or both, this legislation gives you relief. It removes the double and triple taxation of the same income without offset.
Call your Representative and ask her/him to co-sponsor the Andrews-LoBiondo bi-partisan bill, H.R. 2318. Tell her/him that you are holding them accountable for fixing the AMT. They created it. They can amend it.
We would also suggest you thank Andrews and LoBiondo for their bi-partisan effort.
The main telephone number for the US Capitol can direct you to your Representative. They will be paying attention to your call. The number is 202-224-3121. The operator will connect you with your Congressional Member. If you do not know your Representative, give the operator your zip code and they will identify her/him for you.
Citizens Unite! You have nothing to lose but the chains of triple taxation on your income without any mitigating offset.
-David R. Kotok, Chairman and Chief Investment Officer
OT: Just picked this headlne up on one of my favorite sites….
Greenspan Comes Out Of Retirement For One More Interest Rate Hike
June 25, 2007 | Issue 43•26
form The Onion…
Best regards,
Econolicious
And they are going to replace the lost revenue from the AMT fix with what exactly? Or they are (hold it…) Cutting Spending?!!
FYI…
http://thomas.loc.gov/cgi-bin/query/z?c110:H.R.2318.IH:
Paying taxes to different jurisdictions is not ‘double’ or ‘triple’ taxation.
What a buncha horsepoop. Mortgage interest expense is typically a bigger contributor to the AMT bite than state and local taxes, except for those living in NY and other high income tax rate states.
Wanna fix the AMT problem? Raise the exemption amount (considerably) and find a source to pay for the lost revenue.
Congress won’t “fix” the AMT. To them, it isn’t broken.
Be careful what you wish for. What the tax man giveth he can also taketh away.
The problem of eliminating the AMT is the tremendous loss in revenues. This solution would partially eliminate the AMT but would greatly increase the budget deficit.
Sorry everyone, but no chance of this passing while W is in office (though we all can hope).
Alas, almost every single state with an above average/high state income tax rate is a blue state….blame that liberal tax/spend propensity to provide decent state services.
Unless Democrats give W + GOP something really big, Rasputin (er, Cheney + GOP) will find some excuse to shoot down any AMT reform.
Sorry.
We need to pass more of the tax burden to the low wage earners and young people.
How about another increase in the social security withholding (increase the trust fund) or how about a VAT ?
A couple filing jointly with $100,000 or more in AMT taxable income pays about 10.5% of it in FIT under AMT.
Why is that a bad thing?
Somebody must be spiking the water over at the ‘National Association of Realtors” with the Purple Kool-Aid. Now that former “Chief Economist” David Lereah has been carted off to dry out, today their “Senior Economist”, Lawrence Yun gives us this gem:
“We anticipate that given the recent rise in mortgage purchase applications, that the third quarter sales will be higher than the second quarter home sales, and with rising sales that will begin to thin out inventory, and with inventory declining, that prices will begin to firm up.”
Ah, earth to Larry: The supply of unsold homes just reached it’s highest level in 15 years and inventories are RISING.
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I invited Larry to come to the Philadephia Federal Reserve last year to speak along with Steve Berman at Census (Steve is fantastic). Larry doesn’t even remotely speak like that, I seriously doubt he wrote it. I would not at all be surprised if some PR person cranks these statements out in some sort of auto generated fashion.
But still Larry should take responsibility for what goes out under his name.
me,
I think Bush would love this plan. As a tax cut and spend Republican it is perfect for him.
I pay AMT. I really wouldn’t mind it if my money was going to something useful, instead of into Halliburton’s pockets.
It isn’t the taxes, it’s the abuse of our government to create profit for the rich instead of taking care of everyone that is our problem.
Michael Donnelly posted:
“Larry doesn’t even remotely speak like that, I seriously doubt he wrote it.”
Oh, he said it.
In my earlier post, I had transcribed his own words from his appearance on today’s broadcast of the ‘Nightly Business Report‘, but they now have the transcript up:
LAWRENCE YUN, SENIOR ECONOMIST, NATIONAL ASSOCIATION OF REALTORS: “We anticipate that given the recent rise in mortgage purchase applications, that the third quarter sales would be higher than the second quarter home sales and with rising sales, they would begin to thin out inventory and with inventory declining, prices will begin to firm up.”
NBR Transcript Link
You can also watch Mr. Yun on streaming video by going HERE and clicking on the video icon under the “The Housing Market Stalls” headline.
.
Psychology is so critical to today’s markets given their proneness to collapse under the weight of mountains of debt and leverage, they have to always be perceived as optimistic, even to the fault of damaged credibility, they must else they’re out of a job. It’s the offical way don’t you know. Emphasis on bad news will not be tolerated irrespective of how true it is. The public must be kept grazing in the fields and providing all those sweaters. Just discouraged at the continual barrage of non-sensical statements such as Yun’s that gets reported without any critique or objective challenge by the mainstream press. The corrupt leading the willfully blind.
one more while I’m in the “disgusted with society” frame of mine after just reading some blurb about the SEC initiating a preliminary investigation into Bear Sterns…oooow, I bet they’re quaking in their boots now. The castrated pit bull is after them. Better watch out, else they’ll have to, gasp, the thought, the horror, settle the matter private for a few million dollars in fines. That’ll teach them, eh?
It’s all too big to fail. The SEC, nor anyone else for that matter, will do a god damn thing…nothing, zilch. Count on it. Anything affecting the wall street den of thieves will be covered up behind closed doors. Yes, rumors of intervention, cover up etc. will fly around, but just rumors they will be absent of any proof. Too big to fail since it’s all ultimately based on nothing that resemble reality, just subjective models the input/output of which in turn are motivated by the maximization of management greed. aka, the whole can of worms all based on nothing but a bunch of BS crap. These mark to models I guess are a sudden revelation? The downturn in housing and the underlying assets a sudden revelation? The inability to connect the dots and someone with half the intelligence of my cat, figuring hey, if the underlying value of the mortgages are falling, I wonder if the models are being updated to market. The inability to ask the questions of, hmmm…is the market liquid, and if not, how to assess value? I guess my cat is smarter since as usual, so many people were surprised or are now scrambling to cover their ___es. Simply put, it’s too big to fail. The SEC knows it. The Fed knows it. The entire investment bank industry knows it. The hedge funds know it. The mortgage industry knows it. The rating agencies know it. But each of them profit from it. It’s obscene that the rating agencies nursing the fee nipple don’t have their own investigation already launched. But then again, who’d launch. We need police to police the police. Anyhow, even many investors know it, but if they can profit too, then what the hell I guess, eh? As for the ones that didn’t, that’s where Darwinian theory falls flat I guess or caveat emptor applies to dumb people. Fundamentals don’t seem to matter anymore in today’s world, smoke and mirrors and perception rules. Too big to fail, too many people to benefit from continuing the facade. Nice world we live in.
I was on my way over to write more or less what winjr and me wrote. High tax states benefit from the fix proposed by two Congressmen from a high tax state. If that were all there was to it, it might fly, though I doubt it. The problem is that any AMT fix brings the need to find revenues elsewhere (elsewhen?) and the elsewhere will fall on people not helped by the fix of the state and local tax provision.
This is a big hitch. It is the same hitch that crops up no matter how you fix the AMT. Somebody else’s ox gets gored when we stop goring the AMT ox. If the incidence of the new tax is exactly the same as the AMT, why fix the AMT? If not, then who’s gonna explain to the people who will pay to fix the AMT that taxing them is a lot fairer than taxing the AMT folks? If there were easy to fix, it would already have been fixed.
” Yes, rumors of intervention, cover up etc. will fly around, but just rumors they will be absent of any proof. Too big to fail since it’s all ultimately based on nothing that resemble reality, just subjective models the input/output of which in turn are motivated by the maximization of management greed. aka, the whole can of worms all based on nothing but a bunch of BS crap.”
I would like to use this in my next book… May I…?
Franz Kafka
go right ahead Franz…lol
Having lived in two “blue state” cities, high taxes did not provide for an even remotely competent school system, or any other “service” of value not available elsewhere.
The AMT is what NY/CA/NJ/etc. residents deserve for trying to foist their crappy public-sector worker driven “service” model on the rest of the country.
You don’t like paying arbitrary and high taxes? Don’t like finding yourself politically classified as “rich” even if you’re not? STOP VOTING FOR SOCIALISTS.
Until then, stop bitching and pay your “fair share”.
Adding categories of deductions to the AMT would defeat the purpose of the AMT, which is to prevent people from avoiding Federal income tax because of their deductions.
The main problem with the AMT is that the AMT rate is too high relative to the regular tax rates. This became the case when the tax rates were lowered. The solution is to reinstate the previous spread between the rates. This can be done by lowering the AMT rate and/or by raising the regular tax rates.
In addition the AMT should have a flat deduction (not exemption) that is high enough to leave all but the very rich paying on the regular basis.
I think an AMT rate of 25% applying to income exceeding $100,000 would solve the problem. I would raise the top tax rate to 40% under the regular income tax calculation.