The Buffett Tax: Re-Defining the AMT?
In case you haven’t been paying attention, President Obama is expected to announce a bevy of proposed changes that are aimed at reducing the deficit. Perhaps the most intriguing of these is the so-called “Buffett Rule,” which will be a new minimum tax rate for individuals making over $1M/year.
Details still aren’t available, but it sounds like this new rule (if adopted) could do what the Alternative Minimum Tax (AMT) was intended to do when it was introduced back in 1969 – i.e., prevent the richest households from getting off with little or no tax liability despite being in a high income tax bracket.
Here’s what the IRS says about the AMT:
The tax laws give preferential treatment to certain kinds of income and allow special deductions and credits for certain kinds of expenses. The alternative minimum tax (AMT) attempts to ensure that anyone who benefits from these tax advantages pays at least a minimum amount of tax.
Unfortunately, the AMT was never indexed to inflation, so there’s a mad scramble every year by Congress to patch the law and increase thresholds. Even still, the AMT currently hits millions of taxpayers that it was never intended to hit.
Not surprisingly, the Buffett Rule has already stirred up a ton of controversy, and the details aren’t even known yet. Setting politics aside, I’m intrigued by the possibility of replacing the AMT with a new system that actually does what it’s supposed to do. I’m definitely curious to hear more.
Disclaimer: Discover is a paid advertiser of this site.
Reasonable efforts are made to maintain accurate information. See the Discover online credit card application for full terms and conditions on offers and rewards.
Modified on September 25th, 2011 - 6 Comments
Filed under: Taxes
About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
Related articles...
» Is Warren Buffett Smoking Crack?» Buffett Makes Largest Donation Ever
» Warren Buffett’s Tax Rate
» How to Become a Millionaire – Tips on Getting Rich from the World’s Richest Man
» Anatomy of a Stock Market Cycle
» Warren Buffett is Buying Stocks
» An Interview With Bill Gates
» Weekly Roundup – Back to School Edition
Was this article useful? Please sign up to receive our content via e-mail:
6 Responses to “The Buffett Tax: Re-Defining the AMT?”
Leave a Reply
Top Cards by Category
Earn 100 Reward Dollars after you make $1,000 in purchases in the first three months of Cardmembership.
Earn 25K Membership Rewards(R) points after you spend $2,000 during your first three months of Card membership.
Consumer friendly credit card with a great low rate of 7.25% and save on interest charges. No balance transfer fees and no annual fee.
The new Discover it card is out to change the way people think about credit cards. No annual fee. No overlimit fee. No foreign transaction fee & no pay-by-phone fee. No late fee on your first late payment. And Discover won't increase your APR for paying late.*
The new Discover it card is out to change the way people think about credit cards. No annual fee. No overlimit fee. No foreign transaction fee & no pay-by-phone fee. No late fee on your first late payment. And Discover won't increase your APR for paying late.*
Consumer friendly credit card with a great low rate of 7.25% and save on interest charges. No balance transfer fees and no annual fee.
Limited Time Offer: Get 25,000 Membership Rewards(R) points after you spend $5,000 in the first three months of Card membership. Enroll and select a qualifying airline to receive up to $200 annually in statement credits for incidental fees, such as checked bags and in-flight refreshments, charged by the airline.
The new Discover it card is out to change the way people think about credit cards. No annual fee. No overlimit fee. No foreign transaction fee & no pay-by-phone fee. No late fee on your first late payment. And Discover won't increase your APR for paying late.*
- How to Become a Millionaire
- How to Get Out of Debt
- The Best Dollars I've Ever Spent
- How Our Estate Plan is Structured
- How We Paid Our Mortgage In Less than 10 Years
- Money Making Ideas
- How to Manage Your Asset Allocation with Multiple Accounts
- Consumption Smoothing - Save While the Saving's Good
- How to Save on Groceries
- How Much Life Insurance Do You Need?
- Eleven Great Books About Money
- Dave Ramsey is Bad at Math
- Dish Network Customer Service SUCKS
- $8,000 Homebuyer Tax Credit
- Pay Off Mortgage Early or Invest?
- How to Claim the First-Time Homebuyer Tax Credit
- Termite Control: Sentricon vs. Termidor
- How Much Should You Pay a Babysitter?
- Ethanol Blended Gas = Lower Mileage?
- Reduced Credit Limits? Share Your Experience
- $15,000 Homebuyer Tax Credit
- Will Mac OS X Lion Kill Quicken 2007?
- Buying Furniture off the Back of a Truck
How to save money on insurance
- Working longer: Fallback or fallacy?
- More money, more happiness: Do you think money can buy happiness?
- Overdraft fees soared to $32 billion in 2012
- How do you combat prom inflation?
- How should you choose a bank? Look in the mirror.
- The cost of clean water
- College debt 101
- Is it possible to live debt free?
- How to prepare for a home appraisal
- Home prices are up: good news or bad?
September 19th, 2011 at 1:18 pm
The ATM is a mess with lots of unintended consequences that has injured people it was not intended to punish….. not to mention it is help keep many accountants and tax preparers employed trying to figure out how to apply the ATM. The US tax system is a mess. This does nothing to simplify taxes and just adds complexity, and will probably have some not so desirable unintended consequences,
September 19th, 2011 at 4:31 pm
I do agree that the current AMT does need reform with a permanent inflation index. But the current AMT is really not as bad as people act like. Less than 4% of the tax filers pay AMT. Worst case AMT is a 29% rate which is lower than the top marginal rate. The vast majority of people paying AMT are high income households. I don’t think theres even 1 million households making less than $200k subject to AMT. And for those people it generally takes something unique in their tax situation to hit AMT, like very large unique deductions or large gains/losses or something like that. AMT really doesn’t just hit typical middle class people with plain tax situation.
September 20th, 2011 at 9:58 pm
Good thing he started to stir things up when he is around 80…and not when he was a billionaire in his 50s or 60s lol
September 21st, 2011 at 11:05 am
Evan: 30 years ago, the income tax structure was quite different from today, so perhaps he liked it better back then.
September 25th, 2011 at 11:39 am
“AMT really doesn’t just hit typical middle class people with plain tax situation.”
As long as Congress keeps ‘fixing’ it every year, then you are right.
This allows the Congressional Budget Office (CBO) to make deficit predictions as if the AMT weren’t ‘fixed’ each year. And it allows Congress-critters to claim that they ‘lowered taxes’ every year when they ‘fix’ AMT.
Everyone is ‘rich’ using the non-inflation adjusted numbers from the original 1969 law…
September 25th, 2011 at 4:59 pm
Call me cynical, but when ever congress (or anyone)starts talking about raising taxes we all need to run for cover. They’ll frame it in tax-the-rich speak, but ultimately, when they realize there aren’t enough rich people to tax to get the desired result, they’ll find ways to expand it.
This is an excellent time to begin maximizing tax shelters, like retirement plan contributions. It’s often easier to move money before the “reforms” hit and it’s too late.