Did you know that there are two different sets of federal income tax rules in the United States? It’s true. Each year, most U.S. taxpayers either pay income tax under the system that most of us are familiar with or they pay the “Alternative Minimum Tax” – whichever amount ends up being greater. For years, the U.S. Congress has passed one year “fixes” that have exempted millions of middle class American families from the Alternative Minimum Tax. This has essentially been a huge tax cut each year for those millions of American families. But this year, the Democrat-controlled Congress has not passed a “patch” for the Alternative Minimum Tax. So now one out of every six U.S. taxpayers is going to be hit by the Alternative Minimum Tax. The taxpayers most likely to be affected are married couples, very large families, home owners and taxpayers in states that have high state and local taxes. The average tax increase that these taxpayers will be facing is going to be approximately $3,900 and most of them have no idea that it is coming. At a time when an increasing number of families is barely getting by, a tax increase of this magnitude is simply going to crush the American Dream for literally millions of families. Talk about a cruel surprise for tens of millions of Americans this upcoming tax season!
Would you be able to sit down and write a check for an extra four thousand dollars this upcoming April?
So where in the world did this insane alternate tax system come from anyway?
Well, back in 1969 the Alternative Minimum Tax was implemented with the intention of catching high income individuals who were avoiding paying taxes altogether by abusing certain loopholes. But unfortunately, the Alternative Minimum Tax has not really been adjusted for inflation since that time, so now the Alternative Minimum Tax applies to millions of ordinary middle class American families.
Fortunately, the U.S. Congress has been passing a “fix” to this problem each year to avoid this problem, but so far this year the U.S. Congress has not acted.
So now we are on the verge of a complete and total mess.
According to the Congressional Budget Office, approximately 4.5 million American households paid the Alternative Minimum Tax in 2009.
If nothing changes, 27.2 million American households will pay it in 2010.
Are you starting to get the picture?
Do you know if the Alternative Minimum Tax will apply to you this year?
You might want to find out.
The temporary reprieve for middle class taxpayers that Congress passed last year expired at the end of 2009.
Therefore, every penny that you have earned in 2010 is subject to the Alternative Minimum Tax if it applies to you.
Of course Congress could still act and help all of us out by doing something about the Alternative Minimum Tax by the end of the year.
But considering the fact that this Congress is so incompetent that they wouldn’t be able to find their feet if they weren’t attached to the end of their legs, it is hard to be able to count on them to do anything correctly.
In fact, there is very little appetite in Congress right now to do anything that would add to the federal budget deficit in future years.
The truth is that simply eliminating the Alternative Minimum Tax without making equivalent cuts in U.S. government spending would add approximately $626 billion to the national debt over the next ten years.
So this Congress might just decide to let the middle class suffer.
In fact, all of us will be coughing up more taxes soon. In all, there are more than 100 tax provisions that have either already expired or are about to expire.
2011 is already being dubbed “the year of the tax increase“, and unless something changes really, really quickly many of us are going to get some really nasty surprises early next year.
So are you ready to pay even more taxes?
Are you ready to be squeezed like a melon even though it is very likely that the U.S. government will never have a balanced budget ever again?
The U.S. government has piled up the biggest mountain of debt in the history of the world in our names, and in the end we are all going to pay for it in one way or another.