In the recent articles “The Revolt of the Fairly Rich” in Fortune, and “A New Class War: The Haves Versus the Have Mores,” we learn that people in the $100,000-500,000 income range now see themselves as underprivileged. This group includes congressmen, upper-level government officials, journalists at major news organizations, and professors at elite universities. This new proletariat is not exactly voiceless.
The new proletariat’s big cause at the moment is something called the alternative minimum tax (AMT), and they’re using their political and journalistic muscle to reform it to their taste. The tax was originally designed to keep the rich from using various loopholes to escape the income tax entirely. However, because of inflation, $100,000 no longer means you’re as well-off as it used to, but now may make you eligible for the AMT. The new proletariat feels threatened. But just how serious is the threat? A story on the front page of The Washington Post sought to raise alarm about the tax. An example used in the accompanying chart illustrating the harm was of a single parent with six children making $75,000 a year who would have to pay $1,112 more because of the AMT. But you don’t have to get rid of the AMT entirely to provide mercy for that fellow and others similarly situated. Besides, how many parents have six children these days? Two children are far more typical. And a couple with two children can make $80,000 without paying any AMT.
In fact, only 20 percent of taxpayers make $80,000 or more. For these people to wallow in self-pity is ridiculous. They should concern themselves with the 80 percent of taxpayers who make less than $80,000. And the major burden for that 80 percent is not the income tax or the AMT, it is the FICA, or Social Security tax. If we want to help them, we reduce that tax first. Congress has hesitated to touch it because they fear being accused of tampering with Social Security. But if they really want to help the working people of this country instead of themselves, it’s FICA, not the AMT, that should be their target.
I'm all for the single mom, but I think the single mom with six kids making 20K a year is in more need of a break than one making 75K.