History of the AMT (Alternative Minimum Tax)

Back in 1967, there were 155 individual tax returns with incomes above $200,000 on which NO income tax was paid because of the various tax credits, deductions or “loopholes” that exist in tax law. Some of these people were millionaires. Congress was infuriated, and in 1969, passed the Alternative Minimum Tax so that “rich” people would pay some tax.

If you look at $200,000 today, adjusted for inflation, you’d be looking at incomes well over a million. Unfortunately, the AMT happens with wage income well under $200,000 and the personal exemptions from having children. The recent increase in the amount of income not subject to AMT s is not enough to fix this inequity. This is because the exemption for children is considered one of those “loopholes”. And on those tax returns where I see this happen, the individuals ARE NOT millionaires. They are struggling to put their children through school, paying mortgages and high real estate taxes and state income taxes (Wisconsin ranks up in the top 10 for highest state tax rates in the nation), which further penalizes them into paying higher Federal income taxes because the state tax deductions are also a “loophole” taxed by the AMT.

Our tax laws penalized marriage from about the same time as the AMT was enacted, until just a few years ago when Congress changed most married, filing jointly items to be twice that of the single amounts. The AMT law penalizes having children. Why doesn’t Congress finish their AMT reform and take the exemption for children out of the picture for calculating AMT?