Federal Issue Brief

 Alternative Minimum Tax (AMT) Reform

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AVMA Position:

Support

Summary:

The AVMA supports legislation to reform the Alternative Minimum Tax (AMT) that puts an end to the dramatic increase in taxes paid by the middle-income veterinarians and other taxpayers. There are multiple bills in the current Congress that attempt to fix or repeal the AMT.

Background:

  • The individual AMT was originally designed to limit the amount of tax sheltering that high-income taxpayers could pursue and to assure that these filers paid taxes.
  • The current AMT has strayed far from those original goals because the AMT has never been pegged to inflation.
  • Under current law, the tax affected over 23 million taxpayers in 2007—many of them solidly middle-class—and mainly for reasons that have little or nothing to do with what most people would consider tax sheltering.
  • Congress approved a "patch" that revised the exemption amounts used in making the AMT computation for 2010 and 2011 when it passed the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act (H.R. 4853 / PL 111-312 signed into law on 12-17-10). Without the revised exemptions, an estimated 28 million taxpayers would have been hit by the AMT—boosting their tax bills by an average of more than $6,000 each, and, collectively, an extra $136 billion in taxes. For tax year 2010, the bill sets the income threshold that is exempt from the reach of the AMT to $47,450 for individuals and to $72,450 for couples filing jointly. In 2011, those exemption amounts will increase to $48,450 and $74,450 respectively.
  • President Barack Obama's FY 2012 budget proposed a 3-year patch through 2014 to the AMT that is paid for by an across-the board 28% reduction in itemized deductions for high-income taxpayers. This proposal—the same level that was in place at the end of the Reagan Administration—will raise $321 billion over the next 10 years

Justification:

  • The number of individuals subject to the AMT will rise dramatically if Congress does not resolve this issue.
  • The percentage of individuals subject to the AMT with income between $50,000 and $100,000 will double over the next three years.
  • The number of AMT-subjected individuals in the $100,000 to $200,000 income range jumped from roughly 15% in 2005 to 80% in 2006.
  • The vast majority of veterinarians fall in these two income ranges.

Current Status:

Multiple tax bills have been introduced in both chambers that include AMT fixes but all are languishing in either the Senate Finance Committee or the Ways and Means Committee.

AVMA Contact:

Gina Luke, Assistant Director, Governmental Relations Division, 202-289-3204