By Walter Hamilton, Los Angeles Times
February 15, 2012
President Obama is combining his proposal to raise taxes on the wealthy with a new effort to lower the levy on middle-class Americans.
In his fiscal 2013 budget proposal, the president called for abolishing the alternative minimum tax. It was designed years ago to prevent wealthy people from dodging taxes, but nowadays is blindsiding a growing number of middle-income people.
The president wants to replace the AMT with the so-called Buffett rule, which would require people making more than $1 million a year to pay at least 30% in taxes. It's named for billionaire Warren Buffett, who has complained that loopholes give him a lower rate than his secretary's.
The AMT won't vanish any time soon. Obama listed its elimination as a goal in coming years but did not include it as a line item in next year's budget.
It's doubtful that the president's plan would become law given ardent Republican opposition, analysts said. But the tax is disliked by members of both parties, and it could be revamped or eliminated as part of a comprehensive tax overhaul, they said.
The ATM has two glaring shortcomings, critics say.
First, it doesn't meet the original intent of preventing wealthy people from circumventing federal taxes through the use of loopholes and deductions, they say. Critics point to Republican presidential hopeful Mitt Romney, who paid an effective rate of less than 14% in 2010 — far below the top ordinary rate of 35% — because much of his income came from capital gains, which are exempt from the AMT.