Simplify the individual tax code

While originally designed to prevent wealthy individuals from overusing certain tax benefits to ease their tax burden, the alternative minimum tax, or AMT, no longer accomplishes that goal. Instead, more and more middle-class taxpayers are falling into the AMT. In fact, the Bush administration estimates that by 2012, 39 million taxpayers will be subject to it, a full one-third of all taxpayers with a liability. Unfortunately, the administration's budget proposals do little to remedy this problem, proposing yet again a short-term patch while it studies the issue. These temporary fixes result in hidden tax increases at the end of their short life.

Rather than reinstating these provisions every few years, we should simply repeal the individual AMT. The National Taxpayer Advocate has also called for repeal, finding that the AMT calculation adds another 12 hours of preparation time for a taxpayer. That is why I have filed HR 1979, the Individual Tax Simplification Act, which would repeal the AMT. This bill simplifies the tax code for individual filers, resulting in the elimination of approximately 200 lines of tax forms, schedules, and worksheets.

While tax simplification seems like an easy policy to support, it has not been easy to implement. Fixing the AMT problem will cost money; even a modest fix without outright repeal would cost half a billion dollars over a decade. And if all of the new tax cuts passed during the last few years were made permanent, as some have advocated, the AMT fix would cost even more.

But look at who is paying the cost if we do not fix it: middle-income families with children in areas with state and local income taxes, such as ours. That is because the AMT does not recognize deductions for dependents or state and local income taxes. Again, this tax, designed to catch wealthy individuals who were avoiding all income taxes, is now ensnaring millions of unsuspecting middle-income families who were never the intended targets. If we do not act soon, by the end of the decade, virtually all married taxpayers making between $75,000 and $100,000 with two children will be hit by the AMT. That means that all the tax relief promised to these middle-income families will be on a round-trip back to the Treasury Department.

Our hard-working American families deserve better than short-term patches and hidden tax increases lurking around the corner. I am hopeful that this year my colleagues in Washington will join my crusade to enact tax simplification, starting with the repeal of the alternative minimum tax.

US Representative Richard E. Neal of Springfield is a member of the House Ways and Means Committee.