AMT Denies Taxpayers Full Tax Cut, Say Democrats

by Mike Godfrey, Tax-News.com, Washington

20 July 2005

Millions of investors are not receiving the full benefit of President Bush's tax cuts on investment income as a result of the Alternative Minimum Tax, and according to John Buckley, the chief tax lawyer for Democrats on the House Ways and Means Committee, this is a deliberate ploy on the part of the Bush administration.

"The use of the AMT to reduce the cost of recent tax cuts clearly is the most consequential of the many budget gimmicks we have seen in recent years," Mr Buckley claimed in an article published in the Tax Notes journal earlier this week.

The 2003 tax cut lowered the dividend tax rate on qualifying stocks to 15%. However, Buckley explained that the way in which AMT is structured, taxpayers earning less than $382,000 per year are subject to an effective tax rate on dividends and capital gains of 22%, which can affect taxpayers earning as little as $75,000.

"The 1997, 2001 and 2003 tax cuts are remarkably similar in one respect. They used the AMT to limit the benefits provided to middle-income and moderately wealthy taxpayers to provide the greatest benefits to the very wealthy," he added.

In a statement issued through the Treasury Department, the White House dismissed Mr Buckley's analysis as "absurd."

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