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Tag Archives: Income Tax Liability

Per expectations, we have passed the election with no progress on avoiding the year-end “fiscal cliff.”  And also per expectations, several technical issues are proving important.  This note will provide some background on two of them.

 The Alternative Minimum Tax

The alternative minimum tax (AMT) under the individual income tax has been a bit player in the movie version of “The Incredible Fiscal Cliff.”  But those who read the 1,000 page novel (in the original German) know it as a powerful, threatening character.  For this reason, the AMT is beginning to get more attention in the specialist press.


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It looks like 47 might become the biggest number in U.S. politics since “54º 40′ or fight,” which is coincidental enough given that 47 is the average of 54 and 40.  But beyond coincidence, what’s with 47?

It seems clear that the now famous (or infamous to some) number came from an estimate of the percentage of the population that pays zero or negative federal income taxes.  The precise estimate was 46.4 percent of all “tax units” (individuals or families that file income tax returns) as of 2011.  The estimate came from Roberton Williams of the non-partisan Tax Policy Center (TPC, an organization created jointly by the Brookings Institution and the Urban Institute).

When that measurement concept is raised, one usually hears that 47 (or 46.4) is too high a percentage of the population to pay no income tax.  One concern is that bearing at least some of the burden of government is a part of citizenship.  Another is that persons who pay no taxes can vote for candidates who will give them benefits without bearing any of the cost. However, this coin has two sides.

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