海角大神

In the alphabet soup of Washington,聽聽fixed the聽, sort of. In English, the newly enacted American Taxpayer Relief Act of 2012 will permanently protect millions of taxpayers from having to pay the alternative minimum tax without Congress having to approve a temporary patch every year or so. It even knocks a few hundred thousand people off the AMT this year. But it still doesn鈥檛 really fix the dreaded tax.

Since the first Bush tax cuts in 2001, Congress has protected millions of taxpayers from the AMT with one- or two-year patches. Each patch boosted the amount of income exempt from the tax, saving millions of households from having to pay the levy. The 2011 patch, for example, left just聽, down from 29 million who otherwise would have paid the additional tax. Congress never approved a permanent fix because it deemed the revenue loss too high.

With ATRA, Congress bit the fiscal bullet, which the Joint Committee on Taxation pegged at $1.8 trillion over the next decade. It set a higher permanent exemption for 2012 and indexed that and other AMT parameters for inflation.聽聽show what those changes鈥攊n combination with other ATRA provisions鈥攚ill mean.

• More than 30 million taxpayers who would have owed AMT for 2012 won鈥檛 be dinged by the alternative levy. The higher exemption will save them and the 4 million who will still pay AMT more than $85 billion.
• The combination of a larger AMT exemption and higher thresholds for the exemption phaseout and top AMT tax bracket will further reduce the number of taxpayers owing AMT to just 3.4 million in 2013. Without ATRA, nearly 27 million more people would owe AMT this year.
• ATRA鈥檚 restoration of the 39.6 percent bracket and the return of the limitation on itemized deductions (aka Pease) and the personal exemption phaseout (PEP) will raise regular taxes enough to push some high-income taxpayers off the AMT. Of course, not owing AMT is small consolation for those folks, who I鈥檓 sure would be happy to pay the lower AMT bill.聽

One curiosity that won鈥檛 please high-income taxpayers: the new Obamacare taxes on investment income don鈥檛 count in determining whether you owe AMT. Although the 3.8 percent tax on investment income above unindexed thresholds鈥�$200,000 for single filers and $250,000 for couples鈥攊s part of your income tax liability, you leave it out when you calculate whether you owe AMT. Including the new tax when you compare your regular tax liability against potential AMT would protect many high-income taxpayers from having to pay the alternative tax.

The permanent and indexed patch eliminates the need for Congress to revisit the issue every year or so. It also prevents repeated disruption of the tax-filing season. But it鈥檚 not a truly permanent fix鈥攖he AMT will still hit three or four million often unsuspecting taxpayers each year and will hit more people over time because indexing AMT parameters doesn鈥檛 protect taxpayers as their real income grows. TPC estimates that the number of AMT taxpayers will jump 35 percent by 2018.

The right thing to do is reform the income tax so that we don鈥檛 need an AMT to make sure that everyone pays an appropriate amount of tax. Given today鈥檚 paralyzed political environment, however, don鈥檛 hold your breath waiting for that to happen.