Members of the Senate Finance Committee say there is broad bipartisan support for eliminating the Alternative Minimum Tax, which, while it has been tweaked nearly 20 times since its inception in 1969 and curbed in 2013, remains on the books and is ensnaring unwary taxpayers.
During Congress’ August recess, the tax-writing House Ways and Means Committee launched a 31 Reasons for Tax Reform initiative that has included Chairman Kevin Brady, R-Texas, convening with other lawmakers at the Reagan Ranch to tackle tax reform.
Said Brady from the Reagan Ranch on Aug. 21: “For the first time in over three decades we have a president, a House and a Senate who are all committed to overhauling this broken tax code and unleashing the growth of jobs and paychecks nationwide. … With your help, America, we can close the special-interest loopholes. We can lower tax rates for American families and job creators. We can vault America from nearly dead last among our global competitors back into the lead pack with one of the most pro-growth, pro-jobs tax codes on the planet. … This is our challenge. Together – working with President Trump, with leaders in the House and Senate, and with you, the American people – we will rise to this challenge just as our nation has risen to and prevailed over so many great challenges.”
Greg Valliere, chief global strategist for Horizon Investments, said Wednesday that negotiations between Treasury Secretary Steve Mnuchin; President Trump’s chief economic advisor, Gary Cohn; and congressional GOP leaders “are yielding progress.”
Horizon, Valliere said, thinks “a bill could come into focus within weeks. Enactment is still unlikely until next spring, because several controversial issues have to be resolved: a potential haircut for the mortgage deduction, abolition of the state and local tax break, the deductibility of corporate debt, etc.”
On Aug. 23, House Ways and Means zeroed in on how to address the dreaded AMT.
Eliminating the AMT was also being discussed on the other side of the aisle, with members of the Senate Finance Committee warning Wednesday that “more and more hardworking, middle-class families face the threat of falling into the ever-widening reach” of the AMT.
The AMT, the lawmakers pointed out, “not only applies to individuals, but also to C corporations, estates and trusts. Pass-through businesses, such as partnerships and S corporations, pass income through their businesses to partners and shareholders who then may face the individual AMT.”
Originally designed to prevent 155 wealthy individuals from dodging their annual income tax, over the years the AMT has “crept into the pocketbooks” of more middle-class families, the Senate lawmakers said, with the Tax Policy Center stating that married couples with children are more than six times as likely as single individuals to pay the AMT.
For tax year 2015, according to preliminary estimates from the IRS, more than 4.4 million individual filers were subject to the AMT, accounting for more than $26 billion in federal tax payments, the senators say. “The number caught by the AMT is likely to keep on growing, barring action by Congress to eliminate this complex tax that increasingly hits the middle class.”
Added the senators: “For 2016, instructions for the AMT applied to individuals totaled 14 pages of confusion, and the form (Form 6251) comprised 64 lines of calculation – making a calculus exam look simple by comparison.”
Despite automated tax-filing software and “individuals and families typing tax information into their computers, which then do the mind-numbing calculations to, hopefully, arrive at a determination of whether the regular income tax or AMT needs to be paid…., that does not remove uncertainty over whether the correct information is being processed, and the computer got it right, inserting further panic into household tax time,” the senators said.
— Check out Who Pays the Dreaded AMT? on ThinkAdvisor.