Reducing an Unfair Tax Burden on the Middle Class

I wanted to share with you an op-ed I recently wrote with Rep. LoBiondo, called "AMT: the Alternative Middle-Class Tax-Terror." It laid out our plan to help middle class taxpayers avoid unfairly being subjected to the Alternative Minimum Tax. It will be published by the New Jersey Chamber of Commerce.

AMT: the Alternative Middle-Class Tax-Terror
By U.S. Representatives Rob Andrews (NJ-01) and Frank LoBiondo (NJ-02)

Next April, more than 1.5 million New Jersey taxpayers will find themselves paying far more to the Internal Revenue Service than they expected thanks to the Alternative Minimum Tax (AMT). This tax was originally created as a tax to ensure millionaires were paying their share. Unfortunately, the AMT has not been regularly adjusted over the years to account for inflation, increased cost of living and increases in pay.  As a result, more middle-class Americans, particularly in regions with high costs of living like New Jersey, are becoming subject to the tax, while the group for whom it was created in the first place - millionaires - escape its application.

Middle class taxpayers trying to make ends meet should not be subject to a tax intended to make sure millionaires did not hide all of their income in tax shelters. That is why we introduced a bi-partisan bill, H.R. 2987, to amend the tax code to allow the deduction for state and local income and property taxes under the AMT. This would much more accurately reflect the tax burden on people living in states like New Jersey, which have extremely high property or state income taxes.

The fundamental problem with AMT is that there are no consistent elements that make taxpayers subject to its provisions.  The AMT can be triggered by a variety of factors and any number of potential combinations of deductions, including personal and dependency exemptions.  As a result, a New Jersey family with two children and substantial property taxes earning $120,000 could be subject to the AMT, while another family earning far more would not be.

New Jersey is already in the top five states in the country to be affected by AMT; in fact, about 6 percent of taxpayers here paid the AMT in 2004.  By 2007, the estimated amount of taxpayers who will have to figure their taxes under the AMT will go up 13 percent. That is because New Jersey's state and local taxation structure is one of the highest in the country.  Higher state taxes mean a higher likelihood you will be subject to the AMT.

According to a Brookings Institute study, unless it is reformed, by 2010 the AMT will affect 33 million taxpayers, almost one-third of all individual tax returns. This includes 97 percent of married couples with two or more children earning between $75,000 and $100,000.

Allowing for the deduction of state property taxes and state and local income taxes more accurately reflect the real incomes of residents.  People paying tens of thousands of dollars in taxes on their homes, particularly in states where the real estate boom dramatically increase home values, are not hiding income in tax shelters. Instead, they are struggling to pay the tax burden they already have. The AMT only makes this burden more unbearable.

Those who are affected by AMT will come to a point where they must make a choice: spend less money, or leave New Jersey.  Neither option is acceptable if we want to help our economy here to prosper.  That is why we are working to come to a solution to the AMT problem now, and will continue to pursue our options into the next session of Congress.  New Jersey residents should not have to face yet another tax season under the burden of AMT. 

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