“The Family and Business Tax Cut Certainty Bill of 2012 (Sen 3521 ) would patch the alternative minimum tax (AMT) for the 2012 and 2013 tax years for an estimated revenue loss of $132.2 billion.”
Full text of the bill: http://www.govtrack.us/congress/bills/112/s3521/text
It also extends several other popular tax provisions: the deduction for teachers who buy supplies for their classrooms; the exclusion from income of debt forgiveness related to one’s primary home (ie. if your home is foreclosed and your debt discharged, without this extension, the discharged debt is taxed as income!); the ability to make tax-free distributions from IRAs to charities; and more. But it’s the AMT patch which is the real headline here.
The numbers are shocking. And make no mistake – more people fall into AMT now because they’ve had tax cuts to their “regular” income taxes. If the Bush tax cuts expire, the AMT collects an “extra” $1.3 *trillion* over the next 10 years. If they Bush tax cuts are extended, the AMT collects an “extra” $2.7 *trillion.
What we need is not an extension of the AMT adjustments (congressional silliness theater which we go through every year) or a debate about extending or not extending the Bush tax cuts. We need fundamental tax reform. The current situation presents uncertainty for everyone from individuals and businesses to investors (including the foreign countries who buy US Treasury bonds) and rating agencies. If Congress doesn’t get their act together in a credible way, there’s no reason to think further downgrades won’t be forthcoming.
Simpson-Bowles is as close to a decent blueprint as anyone’s seriously suggested since the Reagan days. We should be ashamed of our leadership for not addressing it or adopting at least some of its ideals. The current system of borrowing more every year and making annual adjustments and patches to the code to keep things like AMT from hitting more people, or nearly letting the estate tax go back to 2001 levels and at the last minute patching it for two years to maintain the current levels – now set to expire at the end of 2012 when they’ll revert – is just shameful, unpredictable, way too politically volatile, and absolutely is hurting the economy and therefore every person in the US.
There’s an expression, particularly apt for financial planners and our clients, which says that he who fails to plan plans to fail. However, our government is making it nearly impossible to plan. We all deserve better.
The link below is to an article at CCH, tax experts, about the AMT patch and the effect on deficits if a permanent AMT patch were implemented.