Alternative Minimum Tax Hurts Fire Fighters

March 12, 2007 – One of the top five issues at the 2007 Legislative Conference – the Alternative Minimum Tax (AMT) — might not immediately appear to be a fire fighter issue. But IAFF members could be greatly affected by the AMT as married, middle-class taxpayers with children in high-tax states.

The AMT system is part of the federal income tax system. Created in 1969, the system was intended to ensure that all taxpayers paid at least a minimum tax. Under the economic climate of the time, some high-income households were able to significantly reduce or eliminate their taxes by taking advantage of certain tax laws. Therefore, the AMT was designed to disallow millionaires from escaping their fair share of taxes.

Unlike the regular income tax, the AMT is not indexed for inflation. As incomes rise with inflation, more Americans are caught by the system. While Congress has issued temporary fixes to minimize those affected, no permanent solutions have been enacted.

“It has been acknowledged that this [the AMT] generates so much money that it cannot be repealed without a replacement,” said John Buckley, U.S. House Ways and Means Committee staff member who spoke to delegates at the IAFF 2007 Alfred K, Whitehead Legislative Conference. “But, many democrats have committed to find a revenue-neutral solution.”

If left unchanged, by 2010, two in three taxpayers with incomes between $50,000 and $500,000 will pay higher taxes as a result of the AMT.