As many of you know, the Alternative Minimum Tax (AMT) has not been patched yet this year (for 2007 taxes) and thus approximately 20 million more American tax payers will be hit with this stealth tax when they file in 2008. Our Democrats in the House passed a one-year patch in November, but tied it to an off-setting tax increase (actually closing the absurd loophole for private equity managers, but that's another story) that will in effect cause the idiot in chief to veto the legislation at the expense of those previously mentioned 20 million Americans. Since nuance isn't exactly the forte of the American voter and since our candidates are rarely very good at explaining taxes, I think this will hurt us in the 2008 election if a straight up patch isn't passed.
The original AMT was passed in 1969 to capture taxes on 155 wealthy Americans that paid no taxes the previous year and in that respect the tax itself isn't a bad idea. Unfortunately, our idiots in Congress did not index the exemptions to inflation and thus today that same tax (without a patch) will hit approximately 25 million Americans, many of whom are regular middle class wage earners. For 2007 (this is tax year, you would file in 2008) a married joint filer would get a straight exemption of 45,000 (last year the exemption was $62,000), after which all income is taxed at 26% and the only (there are other less used, but for practical purposes) additional exemption you can take is for mortgage interest (ie no deducting property tax, state tax, local taxes, kids, etc). This essentially makes the AMT a killer to families and to those that live in high tax states (ie the blue ones).
While I agree with premise that private equity managers should have to pay the same taxes as the rest of us, the AMT patch bill is not the place to reform that flaw. Our Democrats in Congress should not gamble with the finances of 25 million Americans just so they can try to capture some additional (and well deserved) taxes on what probably amounts to a couple thousand at most (albeit very rich) private equity managers.
Should Congress not act to patch the AMT (obviously a permanent fix is needed, but that is a much more complex issue) and those 20 million Americans get hit with huge tax bills (and they will be huge) I think we can forget about winning the 2008 Presidency once the Republicans and their very efficient media attack machine get done convincing the typical voter that the Democrats just surprised them with a huge tax hike.
Please call your Representative and let them know you want them to forgo the pay-go rules and pass a one-year patch for the 2007 AMT.