Buffett Tax Rule: The New AMT

Email  Print Print  

Today’s a big day for the deficit hunters as President Obama will be proposing a variety of tax changes (here’s a sneak peek from the NY Times). The most notable of these change is the introduction of a new tax rate for people earning more than $1 million a year. At the moment, the top tax bracket is $379,150. Unfortunately, President Obama hasn’t given details on what the rate should be, what it should affect, and has left that as a task to Congress as part of a larger effort to revamp the tax code.

It sounds a little like the AMT. When the Alternative Minimum Tax was enacted in 1982 (the version that is in existence today), it was designed to make sure that the super wealthy paid a minimum tax, despite all the taxation “options” (read: chicanery) they could employ. Today, the AMT is pilloried annually because it was never indexed to inflation. What was considered rich in 1982 is not considered middle class and so every year Congress needs to put a band-aid on the problem so that more and more people are unjustly ensnared.

The difference here is that the AMT excludes and limits certain deductions and credits when you exceed a certain threshold. This sounds like we’re just introduce a new tax bracket at the higher end. Tax brackets are adjusted for inflation annually so this avoids the inflation problem that plagues the AMT.

{ 17 comments, please add your thoughts now! }

Related Posts

RSS Subscribe Like this article? Get all the latest articles sent to your email for free every day. Enter your email address and click "Subscribe." Your email will only be used for this daily subscription and you can unsubscribe anytime.

17 Responses to “Buffett Tax Rule: The New AMT”

  1. billsnider says:

    I think you said it best when you said Obama will leave the details to the congress. Said differently, nothing will happen.

    Bill Snider

  2. billsnider says:

    Also i think Buffet should tell the whole story. He should also mention that his company pays corporate taxes. So in the end he really does pay more than his secretary.

    Spin is hurting the thinking in this nation.

    • Jon says:

      The other issue with Buffet’s comment is that he is comparing his tax on gains versus his secretaries tax on income. The money Buffet used to buy those stocks was already taxed and then taxed more when it made gains. You really can’t compare apples to oranges here and expect people like me to buy it. When is he going to pay the $1B+ he already owes the IRS for past taxes? He really has no room to talk.

  3. billsnider says:

    I am for higher taxes. However that will not be enough. We have to also cut entitlement programs. The problem is that massive.

  4. Unless this bumps the max of capital gains, I’m not sure how much it will move the needle. Setting cap gains at something like (ordinary_income_rate – 10%, with a minimum of 0) could be a huge source of revenue (essentially setting the top CG rate at 25% instead of 15%).

    (I’m not necessarily advocating this, just saying that this is a huge source of potential tax revenue).

  5. Today is a big day for the spenders who need more revenue to fritter away. This proposal has little to nothing to do with deficit reduction, and more to do with politics and class envy. It is based on false anecdotal data and amounts to a special surcharge on high income earners. What the country needs is more millionaires, not less, and we don’t need government policy driving investment overseas. This will inevitably result in smaller revenues for the government than estimated.

  6. DonC says:

    The problem is that when the government gets the additional tax revenue, they will spend it on other programs and the defectit will just keep growing. OR they will pay down the defectit then just borrow again on tomorrow’s stinking legistlation.

  7. travis says:

    I don’t know everything involved – but what is wrong with a flat tax. Say – 20% tax above a minimum threshold. If you make a $1mm you pay $200,000. If you earn $100k you pay $20k.

    How about building laws without loopholes?

    • saladdin says:

      You think that rate would generate enough revenue to fund roads, military, police, bridges etc…? You are not thinking about the bottom line, the amount of revenue needed/generated. Some studies say 20% will not cut it. Even the Heritage folks can’t say whether a flat tax will generate enough for the deficit.

      Some flat taxes exempt unearned income. Guess who makes a lot of their wealth by unearned income?

      A flat tax is NOT a single tax rate for everything. You would still have payroll taxes on top.

      I don’t understand how someone can ever say a flat tax is “simpler” then what we have.

      • Dave says:

        I think the idea of a flat tax is simple. Tax everyone at the same rate. In practice, it would never be that simple. Also, give a simple concept to our government and it immediately becomes complex with a 20,000 page document explaining the details, exceptions, etc… 🙂

      • An effective rate of 11.35% of all AGI would have the same result as the current tax code.

        The twist … this would raise taxes for about 87% of Americans. Look at your effective rate – not marginal rate – and see if you’re paying more or less than 11.35%. Many of you may be surprised at the impact of your own deductions, exemptions, and credits.

        • I tried to link to an article that broke this down in more details, but I guess links in the comments get filtered out. So I guess you’ll just need to poke around the IRS web site for the info – they have tons of spreadsheets that break things down. In tax year 2009, $865 billion in personal income taxes was paid on $7.6 trillion it aggregate personal AGI.

  8. Anonymous says:

    I’m all for it. The AMT will now only hit millionaires, not middle class families in states with high income taxes as it currently does.

  9. billsnider says:

    Another comment on the Buffet tax.

    You are taxed 15% IF IF IF the investment makes money. You can net losses against gains if you have any.

    This is a win situation for the government.

    That is one of many reasons why the tax is 15%.

    Bill Snider

Please Leave a Reply
Bargaineering Comment Policy

Previous Article: «
Next Article: »
Advertising Disclosure: Bargaineering may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on links posted on this website.
About | Contact Me | Privacy Policy/Your California Privacy Rights | Terms of Use | Press
Copyright © 2016 by All rights reserved.