nightphoenix
Posts: 139
Joined: 1/27/2005 Status: offline
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It adds up to a lot more than 3.5% to a lot of people. To quote the previously quoted college professor again - "Nevertheless, you fail to understand why I am leaving. Jimmy Carter and Ronald Reagan already eliminated the majority of mythical tax loopholes for private citizens. The Alternative Minimum Tax does a grand job of ensuring I pay my due to Uncle Sam. Rough and dirty math that it may be, for every investment dollar I bring in (long term investments), my net taxable income increases by $0.25. The effect of this is to raise paid capital gains taxes from 15% (current level) to 22.5%. If you raise capital gains taxes to 20% base, then the AMT pushes them to 30%. It's a flat 50% increase in the effect of the Capital Gains Tax on long term investments. George W. Bush already punished the day-traders and short-wave investors: all sort term investments are taxed at 35% -- the highest individual income marginal (that's investments capitalized within 2 years of purchase). All said, the AMT results in an effective Individual Income Tax burden of 28.5% on all of my income, regardless of source. I also pay out 22.5% of my income to payroll taxes on the first $115,000 a year. I get no refunds or credits. I pay 28.5% on all income and an additional $25,875 dollars a year for payroll tax contributions. Under Obama's plan, I will lose the scaling exemption for AMT requirements between $150,000 and $750,000, meaning I will pay the highest marginal on ALL income, making my effective tax rate 39.6% on every penny I earn plus the additional $25,875 dollars, assuming zero payroll increases. That's a 28% increase in my tax burden. The AMT mostly affects income between $150,000 and $415,000 now, and the how of it's calculations are tricky. Theoretically, it is 26% of all income under $150,000 + 28% of all income over $150,000. Unfortunately, because I have no AMT preferences other than my personal exemption and my state income taxes, I pay the mathematical maximum."
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