I’ll bet some of you are going to get hit with the alternative minimum tax this month. If you made between $100,000 and $200,000 last year, you might have to pony up an extra $3,000 to the IRS.
I’m in no danger of falling victim to the AMT, but I still believe that, like much of our tax code, the alternative minimum tax is an anomaly that should be scrapped. While $100,000 a year might seem like a lot to some, a couple trying to pay a mortgage, make car payments and save for their kids’ higher education and their own retirement might view it differently.
I’d like to propose something like the alternative maximum tax. We could add up all of the taxes that we pay — state, local, real estate, occupation, sales — and figure out the percent of our income they comprise. Let’s figure they total 30 percent of our gross income. And say we put our total tax bill ceiling at 40 percent, which would mean that we would pay 10 percent to the IRS. How’s that for tax relief?
I’ll bet you accountants and tax lawyers have already come up with nine reasons why this wouldn’t work and, in truth, I really didn’t think this through very thoroughly. However, this idea seems no more stupid or unfair than some already in the codes.
I heard Steve “Flat Tax” Forbes speak in Pittsburgh several months back, and he made a convincing argument to support why a flat tax would be a better alternative to our current system. The flat tax alone may not be the key to a fairer tax code, but it’s something to look at.
As the system exists, corporations and individuals spend many millions of dollars on lawyers, accountants and software to figure out how to avoid paying taxes. Couldn’t that money be put to better use in figuring out ways to more efficiently run businesses, expand production or offer higher pay to employees?
And wouldn’t the talent of professional service providers be more valuable in coming up with business development strategies rather than chasing tax avoidance strategies?
My approach may be overly simple, but I think bringing some simplicity and predictability into the system would be a step in the right direction. Taking some of the uncertainty out of the future always inspires confidence, confidence inspires optimism, and optimism encourages prosperity.
What do you think? I’d like to hear your ideas. There’s got to be a better alternative.
