Kerry in Boston Herald on Taxes
Family tax needs fixing: Mid-income households taking a pounding
By John F. Kerry
Monday, April 17, 2006
This time of year, millions of middle-class families are feeling the pinch of the family tax as they fill out their taxes.
Teachers, police officers, nurses and hard-working families with household incomes in the middle-income tax brackets will be forced to pay the Alternative Minimum Tax penalty, sometimes thousands of dollars.
Families who hoped to use a tax refund or money saved the hard way during the year for college tuition, a down payment or health-care costs will end up in the red because of the Alternative Minimum Tax which would be far more appropriately named the family tax.
But watching Congress and this White House drag their feet on a family tax fix, you would think there is nothing wrong with middle-class families taking a pounding on their taxes in an economy that already squeezes their budgets when they pay bills or fill up the car at the pump.
The problems with the AMT are nothing new. We’ve known this family tax was coming for years. Yet the same Congress which has handed out unprecedented tax cuts for the wealthy for six years running has failed to fix the family tax once and for all.
The administration’s latest budget actually subjects an additional 1.2 million Americans to the AMT.
Without congressional action, the AMT will place this undue family tax on 19 million working families in 2006 and almost 31 million families by 2010.
Massachusetts taxpayers already have the sixth heaviest AMT burden in the country.
We are at this point for three simple reasons that Washington refuses to address.
First, the AMT exemption amount has not been indexed for inflation.
Second, the 2001 and 2003 tax cuts lowered the regular income tax rates without making the appropriate adjustments to the AMT.
Third, capital gains rates have been drastically reduced, but they still are not calculated as part of AMT income.
Like the AMT itself, these oversights may seem mundane, but the results are devastating. Families with incomes under $200,000 will be hurt more than people making over $1 million a year.
The AMT unfairly punishes families with children. The more children in a family, the lower the income necessary to trigger the AMT. For example, if no action is taken in 2006, a family with four children with an income of $58,500 would be subject to the AMT while a family with one child would have to make $72,000 to be affected. By 2010, 89 percent of the families with two or more children with income between $75,000 and $100,000 will be impacted by the AMT.
Some families are already suffering this penalty.
The Klaassens of Marquette, Kan., were forced to pay over $1,000 in AMT penalties because they claimed exemptions for their 10 children.
This family tax has been hidden from the American people for too long. Washington so far seems content to continue collecting the extra revenue at the expense of middle-class families who desperately need the money in their pockets. The wealthiest 1 percent of Americans get a permanent tax cut they don’t really need, and more than 1 million middle-class families get an unfair, unintended tax they can’t afford. That’s just plain wrong.
Americans need to change this unfair tax policy.
The AMT was created because, back in January 1969, Americans learned that 155 taxpayers with incomes exceeding $200,000 had somehow paid no federal income tax. Congress received more letters of protest about these 155 wealthy individuals than about the Vietnam War, and Washington responded with the AMT.
Now the AMT is outdated - instead of 155 Americans getting an unfair tax break, millions of Americans are getting an incredibly raw deal.
It’s time for Americans to once again mobilize and force Congress to restore some fundamental fairness in our tax code.