Obama’s recent budget plan has raised perpetual arguments on his efforts for reducing tax load on middle-class by introducing ‘Buffet rule’ for wealthy Americans.
Obama administration’s proposed budget, if passed in the Congress, would eventually replace Alternative Minimum Tax (AMT) with the new Buffet rule of levying 30 percent minimum taxes on families earning $1 million or more per year.
Budget plan for the year 2013 suggests nullifying the AMT – a flat tax on adjusted taxable income levied on the wealthy and upper middle class Americans.
It’s been over forty years since the American government implemented alternative tax system to prevent wealthy taxpayers from tax evasion through manipulated deductions and exemptions.
Alternative tax hurting middle-class income
Obama officials have maintained that the alternative tax system is inadvertently hurting middle-income groups and hence the time for replacing the AMT with a more cohesive system has come.
Again, AMT system has not been altered in lieu of the rising inflation since the system started over forty years ago. As a result, it is snaring middle income groups by levying tax on the income which would have made them wealthy before but not in the present scenario.
Secondly, various loopholes in the AMT, such as exemption from capital gains, fail to check the wealthy from evading federal taxes.
Buffet rule to improve tax-system
Buffet rule, coined by the Obama administration after the business magnate Warren Buffet, called for minimum 30 percent tax on those earning seven figure income in a year.
Obama officials claimed AMT replacement proposal has been made after long term deliberations and observing nil reforms on molding the current system.
A senior Obama official said the Buffet rule "is to focus the AMT on what it is supposed to do - which is ensure that the highest income taxpayers can't completely avoid their tax responsibilities by taking advantage of various loopholes and special provisions,"