AMT Simplification Won't Help President Bush

by Mike Godfrey, Tax-News.com, New York

16 April 2002

As President Bush set out on a trip to argue the case on the stump for tax cuts, administration officials signaled Monday that they want to revamp the alternative minimum tax.

The AMT cuts in when a person's tax falls below a certain percentage (depending on total income) because of 'excessive' use of tax breaks. But the AMT isn't indexed for inflation, and because last year's tax cuts added a lot of new breaks, millions more people in coming years will have to pay the AMT. Without a change in the law, "we're going to have an explosion in AMT filers," Bush economic adviser Lawrence Lindsey warned.

Mr. Lindsey announced that the administration would try to pass AMT overhaul ahead of more fundamental tax reforms, although the prospects of fixing the AMT this year, or even next year, are uncertain because of the estimated cost of $300 billion over ten years.

Fixing the AMT is just part of the administration's declared goal of simplifying the tax system, but just how difficult a task this will be was demonstrated on Monday when Treasury Secretary Paul O'Neill released his agency's first proposal for unifying the five conflicting definitions of a child for tax purposes.

Although the proposals drew compliments from critics as well as Senate Democrats, it didn't propose to eliminate many of the basic age limits for qualifying children. Those range from under 13 years old for the child-care credit to under 24 for full-time students for other breaks.

Nor would it get rid of current rules. Instead, it would let taxpayers use the current rules, if they want. "Having an additional rule is not simplification," said Robert McIntyre, director of the liberal Citizens for Tax Justice and a frequent administration critic.

One person not to benefit from AMT reform or tax simplification would be the President himself, who reported $811,100 in adjusted gross income for last year and paid $250,202 in federal income taxes, 31% of his income.

Mr. Bush listed as income the salary he earned as president last year, a job he assumed on Jan. 20, 2001, and a portion of his pay as governor of Texas for 2000, reporting income of $381,935 in salaries and $446,437 in taxable interest. The Bushes reported total itemized deductions of $99,647, of which all but $17,000 were charitable donations, representing nearly 12% of their income.

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