As part of its 2011 Jobs Bill, the Obama Administration has proposed the “Buffett” tax to snare millionaires that are not paying what President Obama calls their “fair share.” White House Communications Director Dan Pfeiffer reported in a tweet that the tax would “act as a kind of AMT.” Let’s hope not!!
In 1969 the Minimum Tax was passed to be rebranded in 1982 as the Alternative Minimum Tax (AMT). The original goal was to hook 155 high-income households that paid no federal income taxes. Currently more than half of AMT tax collections come from taxpayers making between $150,000 and $200,000 and it is estimated that by 2015 over 50 million Americans will pay the AMT. As expected, millionaires thwart the original intent of the AMT by hiring tax experts that insure that they avoid the punitive tax. They will likewise sidestep the Buffett tax with the burden falling on thousandaires.
What should instead be done? The U.S. Congress and Obama Administration should immediately undertake fundamental tax reform that eliminates tax loopholes and deductions that are contrary to economic growth. This action would then allow overall tax rates to be lowered for all. Here is an example of a tax loophole that should be eliminated. In 2010, a taxpayer could buy an energy efficient diesel SUV that is used in his/her business and receive a tax credit of $1,800. So far, so good. However, if the SUV weighs more than 6,000 pounds, the taxpayer could take an additional tax deduction of up to $25,000. Only tax preparers at H&R Block can appreciate the onerous tax code that encourages both energy efficiency and gas guzzling.
Adding the Buffett tax will serve only to add more tax goodies such as this for those able to hire astute tax attorneys and accountants. It will certainly create jobs at H&R Block along with other tax preparers. Ernie Goss