@dstark, I tried to figure out the formulae for AMT and Foreign Tax Credits from the forms one year. Couldn’t do it easily. Maybe with a lot of effort. I think it didn’t bite me at the beginning but did for a while and now doesn’t again. But, IIRC, the AMT along with foreign tax credits are the primary reason I switched from TurboTax to an accountant. Even though I have the good fortune to no longer qualify for AMT, I still have to file the tax forms every year to make sure. So, we just need to find the $28 billion somewhere else and we can get rid of it.
@shawbridge, I don’t know about getting rid of the amt.
The arguments, it is just 2 percent here, 2 percent there…
Those 2 percents add up. Pretty soon. We are talking about quite a bit more than 2 percent.
This 2 percent stuff is used all the time to protect people’s tax breaks. “It’s just 2 percent. Let’s get rid of that tax”. Happens on CC all the time. 
So…I guess it depends how the replacement for amt works. Are the same people going to be affected or are we going to switch the tax burden?
Turbo tax could not handle my last issue. I don’t use turbo tax. The rare times I have had an issue with the IRS, it was good to have a CPA explain to the IRS why things were done.
One thing that can be done is to decrease the value of deductions more than we do now. That is what AMT is really doing.
We do this already on schedule A. We can be more aggressive with this and eliminate AMT.
Take the total deductions and multiply by a percentage depending on income.
The CBO did a report on this.
Capping the value of the deduction to 28% would raise $13B in 2013.
Limiting deductions to 6% of AGI would raise $9B.
Shockingly (to me anyway) limiting deductions to $500,000/$250,000 for married/other taxpayers raises more money than either of these other choices.
You do increase taxes on those with fairly high incomes or more who do not pay the amt.
Thanks for the link. I will check it out later.
@dstark, I would only get rid of it if we were replacing the revenue. I would shift it up the income distribution when replacing it, which probably would hit me. I would certainly not shift it down. But eliminating deductions overall might enable lowering the rates a bit. How much would eliminating the carried interest on PE funds and the deferred interest on hedge fund investments recoup?
One analysis in the NYT claimed $18B per year in increased taxes if carried interest is eliminated. The gov’t apparently thinks much less:
@shawbridge, you can definitely make changes to how deductions are figured, eliminate amt and shift the distribution up.
Those numbers about carried interest are disputed. From my memory, I think the cost is $6 billion or more.
I think we should eliminate carried interest because it is fundamentally nonsense.
Futures trades are taxed 60 percent long term, 40 percent short term. You can trade in milliseconds and get these rates. There is something wrong with this too. I received these lower rates. I thought this deal was ridiculous. We could operate at break even and make a lot of money on the spread between long rates and short rates. I think there are billions of dollars here too.
@notrichenough, great link.
The problem with AMT is that you have no predictability. Things that are smart for regular tax planning bite you under AMT and vice-versa. That is not nice or friendly. Taxes should be moderately predictable.
The carried interest exclusion is ridiculous. I see no reason for it to exist other than $$$ being contributed to politicians’ pockets.
@dstark the 60/40 thing was a way to soften the blow of taxing on a mark to market basis, which 1256 requires.
HRSMom, I know that. I worked in the industry. I filed many 1256 forms.
I watched people doing trades phony trades to evade taxes. I was standing right there, next to them while they traded.
I think the blow is softened enough. Many people who needed their blow softened are retired or dead. 
You have some knowledge. What is your background?
There’s also the cost of public disillusion with the fairness of taxation. I happen to pay my taxes fully, but my friend’s taxes being ridiculously low due to carried interest would incline me to take more aggressive positions, perhaps to the point of tax evasion. My friend is an honorable person and I don’t fault him for doing it. But, it brings us one step closer to becoming Greece, where non-compliance is the norm.
I agree with you.
This guy has looked at carried interest and he thinks getting rid of carried interest would generate $200 billion over a 10 year period.
That could wipe out a lot of the costs of getting rid of the AMT.
Both daughters did their own taxes for the first time this year. They asked me a few questions but for the most part got through the returns quickly (using tax software). Part of me feels as though I’ve died and gone to heaven: such a contrast between this year, when I had to do only H’s and my returns, and a few years ago, when I did our returns, both daughters’ returns, FAFSA, and the CSS Profile. (Unfortunately, even this year, H’s only contribution to the process was to suggest a way to save some money, by cheating: recharacterizing some income as a gift. Heavy sigh.)
Ok…I see notrichenough already posted the NY Times link. I missed that earlier.
It included LTCG. I should know. We got caught on that blip. We had shares from IPO from the 1940s. A hostile takeover forced us to sell during that one year when they had a high capital gains tax. It went down the next year.
@notrichenough You are pointing out AMT is complicated. While I agree it is complicated, I don’t see it makes it not equitable. AMT eliminates many deductions. I like that more deductions are taxed under AMT.
You can eliminate all the deductions you want, but the fact is that the AMT no longer serves the purpose for which it was created, which was to make sure high income taxpayers pay at least some tax.
People who make over $400K or so do not pay AMT. So why do we have even have it?
And I do think certain provisions are inequitable. For example, I can’t think of any logical reason to treat ISOs the way that AMT treats them. It’s a big F-U to the high tech industry. Let’s tax income that doesn’t exist!
AMT makes you give back some some your medical deductions. Why? These are people who are already paying a huge percentage of their income in medical expenses. Why do they get kicked when they are down?
Some of the other exclusions, I have no idea what they really mean or why these industries were singled out. I assume it is politically motivated, rather than for logical reasons. Why pick on mines, for example?
The people who make over $400,000 don’t pay amt because they are paying more taxes than they would under amt.
NRE, that AMT no longer serves what it is created for in 1969 does not make it wrong. 2016 is not 1969. I imagine in 1969 there were not so many lobbyists representing special interests pushing for special deductions.
I agree with that. I guess tech industry should play Wall Street game. Incredible they let carried interest go on but get ISO. It just shows how messed up our system is. Wall Street, which does not produce net worth to society, gets favorable treatment while the engine that produces jobs gets punished.
We had that during the first two years of Obama administration, dem president, Congress and the senate with 2/3 majority. We blew it. There was a huge impetus to lasting structural reform following the financial disaster on top. All we got is the ACA, not even a single payer.