Tax relief for the middle class intends to assist them make their businesses thrive and encourages them to create new job opportunities. The relief thus helps millions of families, usually with children, who comprise the American middle class, as a method of rewarding them for helping maintain the country’s economic well-being.
For example, the relief on capital gains tax was envisioned to foster savings and encourage economic progress by infusing the same savings into the financial stream. Almost 65% of tax returns with taxable capital gains are reported by citizens and families whose yearly income falls below $50,000. These taxable capital gains are mostly derived from stocks, real estate, bonds and businesses that will benefit greatly from reduced taxes.
However, there is the Alternative Minimum Tax (AMT) which adversely affected a portion of the middle class that it was supposed to benefit. As a part of the Tax Reform Act of 1969, it was intended to tax higher incomes enjoying exemptions under the regular tax system. But some lack in indexing on effects of inflation classified some middle class families into higher brackets, particularly those with children or who live in communities with higher costs of living.
The AMT also calculates tax differently, adding back the tax reference items before subtracting the EMT exemption. However, the exemption phases out and was has not been inflation-adjusted since 1986. It also eliminates the subtraction of state and local taxes, so there is double taxation in some instances.
Though families whose yearly incomes are lower than $75,000 may be primarily affected, there are areas where that annual family income is not eligible for tax relief under the AMT program. Newer tax relief programs, therefore, usually generate discussions and debates about the AMT.
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