THE STEALTH TAX

Robert Kuttner sounds the alarm about the extension of the Alternative Minimum Tax to middle-class families:

The AMT was enacted in 1970 to prevent very wealthy taxpayers from pyramiding tax deductions and literally paying no tax at all. The idea was that no matter how many deductions you had, you were still required to pay some tax based on an alternative tax schedule. That made sense.

But now, due to inflation coupled with administration tax policies, the AMT is hitting millions of ordinary families, many earning well under $100,000 a year. Within five years, 37 percent of people earning between $50,000 and $75,000 and 73 percent of those with incomes between $75,000 and $100,000 will pay the AMT, compared with less than 3 percent three years ago. Nearly all families earning over $100,000 will pay it, according to a Brookings Institution study.

The AMT reduces the value of the most common middle-class tax deductions, such as the ones for property taxes, state income taxes, medical care, and child exemptions. Adding insult to injury, it leaves intact some of the complex tax shelters used by the wealthiest.

So if you are a home-owning family with children in a state like Massachusetts with high housing costs, you may well get hit this year with a covert tax increase -- via the AMT. For many upper-middle-class families, the AMT tax increase more than wipes out all of Bush's tax cuts.

But Bush has not addressed the AMT tax increase. Why not? Because his administration needs all that revenue to plug the holes in the budget caused by his other tax cuts.