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No Getting Around The Inequity Of The AMT

"The stealth tax" (Cover Story, Feb. 16) was a completely one-sided account. The alternative minimum tax (AMT) was put in place so people would pay their fair share of taxes. The fact that so many people, including me, are now running into it is a good indicator that the Bush tax cuts have created a scenario where millions of people are not paying their fair share. You blame this only on the AMT and not the irresponsible Administration that has caused it to surface.

David McDougald

Beaverton, Ore.

One part of your excellent story on the AMT highlighted its inequity relating to lawsuit awards. In my predicament, not only do I pay tax on money I never saw -- the settlement check went to my attorney, who took his 33% and sent me the remainder -- but I also lose my state income-tax deduction (which in California is huge) and my property-tax deduction (which in Silicon Valley is huge). After that, the state imposes its own AMT.

Of course, Washington loves it. After I pay tax on the money my attorney took out, my attorney also has to pay income tax on the same money!

John Mardinly

Saratoga, Calif.

Years ago, the possibility of adopting a 28% "flat" tax on income (generally no deductions allowed) was seen as the solution for fixing the complex tax system. Today, there is outcry over a tax calculation that preserves a preferential 15% tax rate for dividends and capital gains, allows deductions for home interest and charitable contributions, but generally taxes income at 28%. A modified version of the flat tax? No, it's called the AMT.

Kenneth Barkoff

Director of Taxation

Alliance Capital Management LP

New York

Nowhere in the article did you mention that the AMT is sometimes a permanent tax and sometimes simply a prepaid tax. Preferences such as state and local taxes result in, as the Internal Revenue Service refers to it, tax on exclusion items. This AMT is like bad cholesterol, because you pay the tax and you won't get it back in the future. Good cholesterol AMT, Such as accelerated depreciation and incentive stock option preferences, produces a tax credit that may be available in future years.

If the taxpayer is always subject to AMT, the credit may never be available, but waiting a year, then selling the stock that was exercised that helped create the AMT in the first place, could result in getting some of the AMT back. Your article correctly indicated that tax planning is key to minimize this tax.

James H. Ray, CPA


Since Congress is unwilling to deal with this extremely unfair tax that never achieved its intended purpose, the best answer to the AMT problem is to make everyone pay it. It is really a flat tax that eliminates most of the special-interest deductions and is similar to what many have been advocating as the best way to reform the tax code.

Richard Krieger

Stuart, Fla.

Two stealth taxes -- the AMT and FICA [Federal Insurance Contributions Act] payroll withholdings (7.65% applied on the first $87,000 of wages in 2003 and escalating every year) -- are the tip of a much larger tax iceberg. The percentage of taxes paid by individuals in our country is at an all-time high, while the amount paid by corporations is at an all-time low, because of foreign tax shelters and incorporation of offshore corporate headquarters that have no operating purpose.

Both of these stealth taxes on individuals should be eliminated while a corporate AMT requiring minimum taxes of 20% is instituted. This would create a level playing field between individuals and corporations and between large corporations and small and midsize companies, which are the engines of job creation.

John G. Carlson

Andover, Mass. "Medicare vs. cancer patients," (News: Analysis & Commentary, Feb. 16) was right on, but there's another way government action will hurt those with cancer: Tucked away in the new Medicare bill is a provision whereby, effective January, 2005, payments to oncologists for chemotherapy and other drugs given in their offices will be sharply reduced. The most likely result will be to force patients into hospitals, which will have neither the bed space nor the trained oncology staff to handle such an influx. A few members of Congress want to correct the problem, but cancer patients aren't well organized politically, and the outlook is bleak for those who will be the most affected.

Norman Halford

Darien, Conn.

Editor's note: The writer has been a cancer patient for 13 years.

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