This is Part 3 in a series on tax freedom

Forty-three years ago, the Congress passed created a “tax gun” known as the Alternative Minimum Tax or AMT. The legislation was titled the Tax Reform Act of 1969. Yes, even back then, the word “reform” was used in order to cover actual intent.

Supposedly, the Democrat controlled House and Senate intended to aim that — new at the time — tax gun only at 155 specific American citizens. Yes, you read that right, too.

Typically, each year since implementation, more than 20 million American citizens are in the AMT crosshairs of the incumbent spendthrifts in Washington. That means one in five Americans get hit by the largely concealed AMT tax gun each year. 

Why have Congressional incumbents since 1969 permitted this concealed tax gun?

Put plainly, the AMT has become more like an A-T-M — an Automatic Taxing Machine.

This Alternate Minimum Tax system automatically enables congressional spendthrifts to take still more and more of citizens’ hard-earned money. And, the increasing number of citizens who become collateral damage as a result makes no matter to the federal Leviathan.

Let’s review the history of the AMT. As we do, here’s a question to stimulate your thoughts on the subject. Does any American today believe that any level of government should ever pass legislation that targets specific Americans, using an alternate tax system for only them?

Now the facts:

When passed in 1969, the AMT was not indexed for inflation. In other words, those who wrote it and passed it knew that, over time, the number of American citizens that would be targeted by the AMT as well as the number that would be collateral damage would certainly increase.

Perhaps, one way to describe it would be like trading a rifle for a shotgun? Another way might be trading a gun for a bomb — in terms of the ATM impact on people.

Why?

The incumbent legislators knew that those Americans hit by the AMT would lose many deductions and exemptions allowable in computing their regular tax liability.

What’s the procedure?

After taxpayers complete their normal tax code calculations, the AMT system uses a different set of rules for determining both taxable income and allowable deductions (for those specific taxpayers); and, the AMT system uses a 26-28 percent rate calculation to determine what is called the Tentative Minimum Tax (TMT). The TMT is then compared to the income tax amount calculated via the normal code.

Today, targeted taxpayers are folks who have what are known as “tax preference items,” such as, “long-term capital gains, accelerated depreciation and percentage depletion.” Also included are certain tax-exempt income, certain credits, personal exemptions and even the standard deduction.

That’s how the 1969 Congress selectively targeted 155 citizens and installed an alternate tax system that now affects more than 20 million American taxpaying citizens.

Over the years, the average American affected by the AMT has paid thousands of dollars in additional taxes.

Earlier this year, the Congressional Budget Office estimated that the average AMT tax increase would be $3,900, with some paying more than $8,000 extra. Whatever the amount, the additional tax will be on top of the increased cost of energy to heat homes and fill gas tanks.

Congress has repeatedly been urged to repeal the AMT. But, over the years, regardless of the affiliation of the party majority, Congress never takes that action. Since loading the AMT ‘tax gun in 1969, adjusting up the threshold is the only action Congress has ever taken. And, in each instance, Congress has repeatedly avoided adding indexing to each temporary fix. That’s unconscionable, too.

But, more unconscionable is the very existence of the AMT.

Postscript:

A presidential candidate with the courage to tell the American people about the AMT tax gun aimed at their head and the will to demand that the next Congress immediately repeal this inappropriate alternate tax system would make at least 20 million Americans stop, listen to and, perhaps vote for them.

To be continued

Richard Olivastro is president of Olivastro Communications. Rich Olivastro@ gmail.com or by phone at 1-877-RichSpeaks.