The good news we’ve been reading this week is that the desperately-needed Alternative Minimum Tax patch has now been included in the same bill as the extension of the so-called Bush tax cuts. Congress is anxious to adjourn and get home for Christmas, and the last remaining pockets of resistance are lame-duck House Speaker Nancy Pelosi and the more liberal Democrats. But even these folks currently are being courted with some special tax breaks that they can take home to their constituents, so things definitely are looking up for getting the patch done.
The proposed legislation
Draft legislation for the official fix has been released, and, as has been reported in previous articles, the AMT exemption amount – the actual mechanism in the tax law to keep the additional 20-plus million taxpayers from falling into the AMT this year – will be adjusted in 2010 to the following amounts:
Married filing jointly $72,450
Single taxpayers $47,450
A pleasant surprise is that the proposed legislation also includes a patch for 2011, so, if passed in this form, Alternative Minimum Tax payers and the other 20+ million folks will not have to go through this angst again one year from now. Here are the proposed amounts for 2011:
Married filing jointly $74,450
Single taxpayers $48,450
As has been mentioned before, these amounts seem generous in view of the low- to no-inflationary period in which we find ourselves, but if the economic forecasters up on Capitol Hill feel that these are the necessary numbers, that’s just great.
The cost
Congress has been trying to operate under a "pay-as-you-go" system (also known as "paygo") for many years now, but once again this is being tossed out the window. Paygo simply means that if tax cuts or new spending programs are enacted, they must be "paid for" by finding offsetting revenue raisers or cuts in existing programs. While this certainly is an admirable concept, and one which Congress generally holds itself to at least with respect to minor legislation, there is simply no way this monster bill can be paid for.
The current cost estimate for the patch at the above exemption levels is 136 billion dollars. This estimate also includes allowing certain tax credits to continue to be used against the AMT as well as the Regular Tax, but the cost of these two parts has not been broken out separately by the Joint Committee on Taxation. The total cost of the bill, which includes extension of the Bush tax cuts, an estate tax fix and a number of other "needed fixes," is over $800 billion, and climbing due to the special tax breaks mentioned above.
Summary
For each of us as an individual taxpayer, cheers seem appropriate for the progress being made, and the likelihood of an AMT patch being enacted once again. For each of us as individual citizens, however, wondering when all of this wild deficit spending ever will end, perhaps jeers are in order. Regardless of whether readers find themselves in the cheering crowd or the jeering crowd, at least it looks like we soon will be able to get about our business of doing necessary year-end tax planning.
