US Tax Panel Reaches Consensus On AMT Repeal

by Mike Godfrey, Tax-News.com, Washington

22 July 2005

In its first major decision since its inception in January, President Bush's Advisory Panel on Federal Tax Reform has called for the elimination of the Alternative Minimum Tax system.

"The panel has come to the consensus that we ought to repeal the AMT," panel chairman, former Senator for Florida Connie Mack told reporters following a presentation on Wednesday.

However, Mack conceded that the panel as yet has no clear idea on how to replace the $1.2 trillion in tax revenues that the AMT will bring in over the next ten years. Also, panel vice chairman, former Senator John Breaux (D - La) suggested that some form of alternative system must exist in the tax code to ensure that the wealthy can not get away with paying little or no tax.

The AMT is a shadow tax introduced in 1969 to ensure that wealthy Americans benefiting from various tax deductions and credits make a sufficient contribution to the tax system. However, the tax was never indexed to inflation and as a consequence is affecting increasing numbers of taxpayers down the pay scales that it was never intended to hit. It has been estimated that the AMT’s growing reach will affect 20.5 million taxpayers by 2006, up from 3.8 million in 2004,

The commission members also indicated their preference for removing the minimum corporate tax as part of a broader overhaul of the corporate tax system, although it appears that no decisions have been made beyond repeal of the individual AMT.

Nonetheless, Mack has set five goals for the panel when it reports its recommendations at the end of September, including: simplifying tax filing procedures; promoting fairness and removing tax gimmicks; scrapping inefficient tax breaks and loopholes designed for special interests; encouraging savings and; removing barriers to competitiveness in American business.

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