Alternative Minimum Tax created for the sole purpose of curbing the tax breaks claimed by the wealthy has started to show its ugly face to average Americans. In 2001 one million Americans will be affected by this Tax; in 2002, if the bush tax rate cut is approved by congress on March 9th 2001, the number will rise to 3 million. If nothing were done to change the AMT for the next ten years, 14.7 million taxpayers would be affected by it.
The need to amend the AMT has reached extreme urgency. With wages rising, no one is willing to inflate the AMT accordingly. For many Americans in due time the advantages of the tax rate cut will evaporate very quickly. Even the republicans themselves are worried about the AMT. They dont have a solution right now. They are debating on how to tackle it before it becomes a monster. Amending the AMT would cost the administration $200 billion and take them over the $1.6 trillion limit set by Bush. They are trying to come up with a plan to integrate the AMT changes without upsetting the limit.
The Bush administration has known about this problem for a while now but has decided to go through with the cuts anyway. They have decided to make the cuts now, in turn make the American taxpayers feel good by paying less taxes, and worry about the consequences in due time. The trouble with due time is that by the time that it comes around any kind of changes that republicans want to make are too late to act on; the damage is already done.
The tax cuts should be shelved for now as long as the AMT is not adjusted for inflation. But that wont probably happen. The tax rate cut would be approved by congress in couple of days and history will teach us a lesson in due time about acting.