from
(snip)"I listened to Obama the other day. He was pretty clear on the issue of taxes. He said that marginal tax rates on those making $250,000 or more would go up if he got his way. It is a fair bet that this is the way it will work out. The Bush tax cuts for those under 250K will be retained for a few more years and taxes are going up for the fat cats making over $250k. That sounds reasonable. After all, we are broke and have to raise taxes someplace.
But I did not hear word one from the Big O about AMT taxes. That is another set of tax laws that is subject to a sunset at the end of the year. This is a screwy tax (that I have been subject to for years). If one is subject to the AMT you lose deductibility of a number of things. Charitable contributions, property taxes and child-care deductions are lost. It is also dependent on the ratio of earned versus unearned income. It is an ugly tax that everyone will hate.
This a big deal. Congress has been putting a patch on this every year for the past five. The 2010 patch cost Treasury $70billion. According to the CBO, if the AMT is allowed to sunset it will increase the number of individuals that are subject to this tax from 4.5mm to 27mm in 2011. This would result in nearly every individual or family with income of $100k+ to pay more tax. The CBO estimate is for an increased tax bill of $3,900 per filer. That would come to $90 billion of additional tax. The vast majority of those making $250k or higher are already stuck in the AMT trap. Therefore the bulk of this increased tax burden would fall on those making between $100k and $250k.
Watch as this evolves over the next few months. Should we see the “Great Compromise” from D.C. where marginal taxes go up for the wealthy but no action is taken to address the AMT problem a significant percentage of the population will be screwed. When and if that happens you will hear that great sucking noise from the economy. When 30 odd million people get hit with another $4k in taxes the economy will stall, again."(snip)
The expiration of the A.M.T. 'patch' will, as the article states, increase out-of-pocket US federal income tax payments down to an annual earnings level as low as $75k per year, and will significantly increase federal income tax payments for those above the $100k per year earnings level. From the point of view of serious professional dancers, not only will this translate into higher federal income tax payments on their own income, but it will also 'reach' straight into the pockets of their 'core' strip club customer base.
for those not familiar, the AMT reduces or eliminates ...
- federal tax deduction for state and local income, sales and/or property taxes paid
- dependent deductions
- business expense deductions
- medical expense deductions
- home equity loan interest expense deductions
- tax-exempt status of gov't issued development bonds ( pure muni bonds are still 100% tax exempt though )
- charitable contribution deductions
... along with a bunch of other more 'esoteric' items such as below market value stock options
Also, the AMT basically amounts to a 'flat tax' on taxable income over the AMT threshold ... which in the absence of another congressional 'patch' will begin to affect US taxpayers a lot lower income levels than people expect ...
^^^ note that this graph is 'out of date' , but represents the same principles. Where dancers and strip club customers are concerned, probably the most important difference is that beginning at the ~$50k per year taxable income level, the AMT effective tax rate is significantly higher than the 'normal' income tax rate ( i.e. 26% versus 15% on each additional dollar earned over ~$50k ).
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