Alternative Minimum Tax

In his op-ed "Annapolis dines at federal expense" (June 13) Sean Kennedy wrote: "The more Maryland taxes federal employees, the less money Uncle Sam can ask from them in taxes. " I have issues with this on several points. First, this applies to all workers, not just federal, and it is an attempt by the IRS to eliminate income taxes on money that is spent to pay other income taxes. Second, it only applies if one itemizes and does not take the standard deduction. Third, the alternative minimum tax eliminates this subsidy since it does not recognize either the standard or itemized state tax deduction (or personal exemptions either)

It looks as if the administration and the lame-duck Congress are hell-bent on increasing taxes on "the rich," and we should all care about that because the U.S. already has such a levy: It's called the Alternative Minimum Tax. It was put in place in 1969 to catch a handful of rich folks who were not paying their "fair share. " But next year, thanks to bracket creep, the AMT will snare as many as 20 million middle-class Americans as well. Is that fair? That's how "tax the rich" works.

Though political winds have switched course for 2007, investors probably needn't batten down the hatches for major changes emanating from Washington. Democrats control Congress, but they want to avoid doing anything that appears overly brash and might scare voters away in the 2008 presidential election, experts say. President Bush still has veto power. As a result, gridlock is likely to be in style. Some changes are expected to occur, such as a boost in the minimum wage, but action on other pocketbook issues likely will be limited.

In his op-ed "Annapolis dines at federal expense" (June 13) Sean Kennedy wrote: "The more Maryland taxes federal employees, the less money Uncle Sam can ask from them in taxes. " I have issues with this on several points. First, this applies to all workers, not just federal, and it is an attempt by the IRS to eliminate income taxes on money that is spent to pay other income taxes. Second, it only applies if one itemizes and does not take the standard deduction. Third, the alternative minimum tax eliminates this subsidy since it does not recognize either the standard or itemized state tax deduction (or personal exemptions either)

PRESIDENT Bush's sweeping tax-cut plan still suffers from some basic flaws, even as the Senate nears the end of its work on the proposal. Whether a conference committee of House and Senate leaders ultimately approves the president's more generous tax cuts or the slightly trimmed-down measure thrashed out by Senate Finance Committee Democrats and Republicans, the scope of these tax cuts could do long-term harm. By returning such a huge sum of money to taxpayers over the next 10 years -- between $1.35 trillion and $1.5 trillion -- Washington would shrink the cash available for domestic spending.

WASHINGTON - Plans to rush an extension of popular personal tax cuts through Congress before it starts its six-week summer break collapsed yesterday. The Republican leaders of Congress - Senate Majority Leader Bill Frist of Tennessee and House Speaker Dennis Hastert of Illinois - had agreed late Tuesday on the outline of a deal to extend the tax breaks for at least two years. Democrats said they were willing to go along. The three tax breaks, which expire Dec. 31, lessen the "marriage penalty" that raises taxes for some couples, preserve the 10 percent tax bracket, and offer a refundable tax credit of $1,000 a child.

With all the complaints about Gov. Martin O'Malley's deficit-reduction plans echoing through the corridors of the State House this week, lawmakers ought to be reminded of the good. High among these is the prospect of lower income taxes for the vast majority of Maryland taxpayers - with even the poorest benefiting from an enhanced earned income tax credit. This is a critical part of the governor's tax plans, perhaps the most important element, if only because it offsets his proposed 1-cent sales tax increase, a truly regressive source of revenue.

Abroad, if not unanimous, majority of Congress agrees that 23 million middle-income Americans - including 553,000 in Maryland - should be spared the bite this year of the ever-voracious alternative minimum tax. But taxpayers and tax collectors are getting very nervous because the annual AMT rescue hasn't happened yet. Worse, House and Senate Democrats are not in agreement about how the $50 billion in lost revenues should be offset by raising other taxes...

For years, Congress and the White House have been playing chicken with an ever-growing tax bite known as the AMT. It looks like either unsuspecting middle-class taxpayers or a new commitment to fiscal discipline will lose out. Republicans who are chortling, though, at a dilemma that primarily confronts Congress' Democratic majority would be wise to look at who get hurts by their failure to cooperate. If taxes for this year suddenly go up by an average of $2,000 each on 19 million households, angry Americans will hold everyone in Washington to blame.

It looks as if the administration and the lame-duck Congress are hell-bent on increasing taxes on "the rich," and we should all care about that because the U.S. already has such a levy: It's called the Alternative Minimum Tax. It was put in place in 1969 to catch a handful of rich folks who were not paying their "fair share. " But next year, thanks to bracket creep, the AMT will snare as many as 20 million middle-class Americans as well. Is that fair? That's how "tax the rich" works.

If national Democrats and Republicans won't say it, if neither President Barack Obama (now officially declared for re-election) nor newly minted Speaker John Boehner (just four months after capturing the House gavel) will either, I guess I have to: It's time to raise income taxes, especially on the wealthiest. America has deficit and long-term debt problems. Like any budget morass, there are two general categories of solutions — spend less or raise more. It's really that simple.

I was listening to Brian Kroneberger's financial report on our morning show Monday. After listing all the negatives shaping up for the week in the markets, he said, matter-of-factly, "I want to wish good luck to all investors." Ordinarily, this kind of sentiment would herald a market bottom. When hope is lost, we expect the beginning of a rebound. At least we do in a business-cycle kind of recession. We are coming to understand, however, that the present mess is not merely a business recession but rather a global depression whose depth and duration are impossible to predict.

For all the efforts of Sens. John McCain and Barack Obama to portray themselves as willing to break with their parties to get things done, the economic debate that opened their general election campaign this week previews a classic clash. It is a battle between Republican supply-side economics and a Democratic tradition that uses government levers to try to reduce inequality and spur the economy. McCain, who once opposed the Bush tax cuts in part because they favored the wealthy, has now made extending those cuts a central plank in his economic plan, which is based largely on the Republican credo that tax reductions stimulate the economy.

The trick with congressmen isn't merely stopping them from passing bad legislation. It's getting them to fix the terrible laws they've already enacted. For years, thousands of victims of a bizarre booby trap in the tax code have been pleading for help from Congress and the Internal Revenue Service. Their situation is so pitiful -- and the law so contrary to decency and common sense -- that Genghis Khan would have granted relief and apologized. Congress won't do either. After months of hearings, meetings and patient pleading, the legislature failed to assist people who owe taxes on phantom stock option income from the 1990s technology boom.

For years, Congress and the White House have been playing chicken with an ever-growing tax bite known as the AMT. It looks like either unsuspecting middle-class taxpayers or a new commitment to fiscal discipline will lose out. Republicans who are chortling, though, at a dilemma that primarily confronts Congress' Democratic majority would be wise to look at who get hurts by their failure to cooperate. If taxes for this year suddenly go up by an average of $2,000 each on 19 million households, angry Americans will hold everyone in Washington to blame.

Abroad, if not unanimous, majority of Congress agrees that 23 million middle-income Americans - including 553,000 in Maryland - should be spared the bite this year of the ever-voracious alternative minimum tax. But taxpayers and tax collectors are getting very nervous because the annual AMT rescue hasn't happened yet. Worse, House and Senate Democrats are not in agreement about how the $50 billion in lost revenues should be offset by raising other taxes...

Friends who are 70 1/2 are receiving their minimum distribution and investing each year in a Roth IRA even though they don't have any earned income. Can I do this? -- Patricia Kunkel, Cleveland You need earned income to contribute to a Roth individual retirement account, but your friends may be doing something a little different, said Julie Schatz, a financial planner with Investor's Capital Management Inc. in Menlo Park, Calif. They may be withdrawing funds from a 401(k) or traditional IRA to satisfy their required minimum distributions and paying the tax on that money, then withdrawing even more from their accounts, paying the owed income tax and converting that additional money to a Roth account, which is legal, she said.

WASHINGTON -- The tax-writing House Ways and Means Committee rejected a fast-track version of President Bush's budget yesterday but kept the nation guessing on details of the Democratic plan for jump-starting the economy.At a rancorous committee meeting, Democrats and Republicans accused one another of turning the economic debate into a political battleground and of threatening a budget-busting bidding war over tax cuts.Both sides paid lip service to the widespread unemployment, insecurity and hardship in the nation, but neither showed any signs of compromising on how to respond.

Not again. You may recall that Congress last year extended several tax breaks too late to meet the printing deadline for tax forms. Tax filers had to know to claim those tax breaks on lines for other deductions. Congress is well on its way to blowing this year's printing deadline, too. Legislators have yet to agree on a temporary fix to the alternative minimum tax. Without it, an extra 21 million tax filers will be hit with the AMT in the coming filing season and pay on average $2,000 more in federal taxes.

With all the complaints about Gov. Martin O'Malley's deficit-reduction plans echoing through the corridors of the State House this week, lawmakers ought to be reminded of the good. High among these is the prospect of lower income taxes for the vast majority of Maryland taxpayers - with even the poorest benefiting from an enhanced earned income tax credit. This is a critical part of the governor's tax plans, perhaps the most important element, if only because it offsets his proposed 1-cent sales tax increase, a truly regressive source of revenue.