EK 21 - Macroeconomics
Alternative Minimum Tax (AMT)
The Alternative Minimum Tax was originally designed at targeting wealthy persons with crafty tax advisors or a plethora of tax exemptions. What it is, is an alternative tax calculation providing income tax. When this number is calculated (The AMT) you compare your regular income tax and the newly derived AMT. If the AMT is higher then your regular income tax you're paying, you're required to make up the difference in tax dollars thus paying an AMT tax. The idea behind the AMT is great, but for various reasons more and more people are being required to pay AMT with lower salaries. It was reported that in the year of 2000, 1.3 million people paid AMT. This was a huge spike comparatively to the number of individuals that paid AMT only 10 years ago (132,000). Although Congress is trying to figure out ways to balance and regulate the AMT the number of individuals expected to pay AMT is on the rise. Congress in 2006 has passed a bill that will shield an estimated 17 million or so from paying the higher AMT tax in the year of 2006. This is just a temporary move though in part by congress which would cut federal tax revenue by $31.5 billion dollars. Long Islanders are greatly affected by AMT due to state and local income taxes, property taxes, and personal deductions being added back. Senator Chuck Schumer forecasts that if no action is taken, 4 times as many Long Islanders will be affected by the AMT in 2006. This is another whopping 193,000 Nassau and Suffolk County dwellers paying AMT in 2006. It is clear that actions must be done to regulate this old act, and to help relieve the stress of the tax payers.