Avoiding the AMT (and completely missing the point...)

"My sense of it is that the people who introduce these provisions know exactly who is going to benefit."

Thus spake Howard Gleckman, senior research editor for the Tax Policy Center, regarding an IRS report stating that 7,389 federal tax returns with over $200,000 in adjusted gross income paid no federal income tax in 2005. That amounts to a 75% increase over the previous year (these are the most recent data available from the IRS).

The reason seems to be some small, but nonetheless powerful, changes to the tax code in 2004 and 2005. One change was allowing people to eliminate up to 100% of the alternative minimum tax liability by receiving credits on taxes paid to foreign governments. Seemingly innocuous, right? After this change, the claims on foreign tax payment credits went from $16 million to $447 million in one year. In other words, legislators put a little loophole in the AMT that obviously had some benefit to some very wealthy people. Ah, the Bush Tax Cuts.

In any event, I agree with Howard.