Homework assignment: Read Democrats Seek Formula to Blunt AMT
From to the article:
House Democrats looking to spare millions of middle-class families from the expensive bite of the alternative minimum tax are considering adding a surcharge of 4 percent or more to the tax bills of the nation’s wealthiest households.
Under one version of the proposal, about 1 million families would be hit with a 4.3 percent surtax on income over $500,000, which would raise enough money to permit Congress to abolish the alternative minimum tax for millions of households earning less than $250,000 a year, according to Democratic aides and others familiar with the plan.
I wasn’t exactly sure what a “surtax” was so I looked it up. According to dictionary.com, a surtax is:
1. an additional or extra tax on something already taxed.
2. one of a graded series of additional taxes levied on incomes exceeding a certain amount.
–verb (used with object)
3. to put an additional or extra tax on; charge with a surtax.
One thing isn’t clear to me: Is the $500,000 figure “income” or “taxable income?” Based on the 2007 Federal Income Tax Brackets, someone who had taxable income of $500,000 or more would be in 35% tax bracket. Add a 4.3% surtax to that and it brings their total tax to 39.3%.
So, what do you guys think? Is this fair? I’m not sure what I think about this. I’m not a fan of progressive taxation but I don’t have a better answer other than a flat tax.