The Alternative Minimum Tax

Statement

Thanks to a 40-year old oversight, on January 1st, 2008, 25 million Americans will see their tax bill increase, just because the date changed.

In 1969, Congress adopted the Alternative Minimum Tax - or the AMT - to ensure wealthy individuals could not avoid income taxes. At the time, this seemed like the perfect solution. However, while regular income tax rates are indexed for inflation, the AMT is not. According to the Tax Policy Center, the average AMT taxpayer owed more than $6,000 in additional tax in 2006.

As income levels have increased over time, the AMT has become a huge burden on our nation's middle class and has created paperwork headaches for farmers and ranchers with the length and complexity of the tax code.

The AMT is a disparate tax system with its own definitions, exclusions, deductions, credits and tax rates. Taxpayers are required to calculate both their regular income tax and the AMT and then pay the higher of the two calculations. In fact, it should be called the Alternative Maximum Tax.

Farmers and ranchers pay a disproportionate amount of their income in AMT because of the way the tax is calculated. Farmers and ranchers pay more because they lose the ability to deduct some of their state and local taxes, some farm and ranch operating losses, and because they tend to have more capital gains tax income than other taxpayers.

By 2010, one in four households will owe the AMT. For farmers and ranchers, the numbers will be more than three out of ten owing the tax due to the distribution of farm household income.

It is worth noting that the AMT was originally meant to apply to only 150 Americans who had escaped the income tax in 1969. Now, it threatens 25 million taxpayers.

Fortunately, there is a relatively easy solution for those who believe, like me, that Americans should keep more of what they earn. By repealing the current law and instead indexing AMT to inflation, we could ensure fair taxation.

As a Member of the House Budget Committee, providing a fair tax schedule is an issue of great importance to me. The short-sightedness of Congress when it first adopted the AMT should not continue to be a burden on U.S. taxpayers, and I am working hard with my colleagues to stave off this impending financial tidal wave.

Both Republicans and Democrats agree the AMT is a huge monster over the horizon for our economy. We need to take a fresh look at this tax provision and, by working together, deal with it in a way that doesn't harm our economy.

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