A nasty surprise awaits the middle class come tax day
Beware: The alternative minimum tax could soon snag you.
The minimum tax, enacted to make sure that even the ultra-rich pay some income taxes, may hit 44 million households, including families making less than $50,000 a year simply because they have lots of children to claim as exemptions or take other tax breaks.
The non-partisan, private Tax Policy Center estimates the tax will:
Congress enacted the tax in 1969 amid reports that 155 ultra-rich Americans avoided paying a penny in income tax. The alternative tax has been on the books since then, never indexed to inflation.
The tax breaks President Bush and Congress enacted since 2001 expanding child tax credits and "marriage penalty" relief make it more likely taxpayers will owe the alternative minimum tax.
Bush called for permanent extension of these tax breaks in his State of the Union address but not reform of the alternative minimum tax, which denies families most of the Bush write-offs. The 2003 tax cut contains a temporary provision that will help many families avoid the alternative minimum tax through 2004. But repealing the tax entirely would cost the Treasury $600 billion in the next 10 years.
And there's insult to the injury, the IRS says:
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