The percapita income in Californiawas $33,749 in 2005, according to U.S. Census Bureau Data.
If thealternative minimum tax fix that expired in December isn't renewed, taxpayersmaking as little as $30,000 to $50,000 could be hit by a levy aimed 40 yearsago at making sure the creative and well-heeled pay up, according to the TaxPolicy Center.
Yet thereare people - important people, such as the No. 3 Democrat in the U.S. House ofRepresentatives - who insist on painting the AMT fix the Senate added to thestimulus bill as a bailout for the wealthy.
"Weneed to get people back to work," South Carolina Rep. Jim Clyburn told TheWashington Post last month. "And you can't get people back to workgiving rich people tax cuts."
He'swrong on two counts.
First,it's not a tax cut. It's a change needed to keep bills from going up an averageof $2,300 a year because Congress forgot when it created the tax in 1969 tomake the AMT adjust automatically for inflation every year. On top of that,most AMT victims face underpayment.
If thepatch isn't approved, the number of people AMT would affect would skyrocketfrom 4 million in 2008 to 31 million this year, theTax Policy Center says. The AMT exemption would fall from $69,500 formarried filing jointly and $34,975 for single filers to $45,000 for marriedsand $22,500 for singles.
Withexemption levels that low, it's easy to see a scenario where someone is laidoff this year but still manages to earn enough to be subject to AMT when filingtime rolls around in 2010. That would be an incredibly cruel joke in California, which is third in the nation inunemployment and first inforeclosures.
It lookslike a tax cut on paper, though, because every year revenue projections arebased on how much the AMT would bring in if the patch weren't reapproved.
Secondly,AMT hits far more people than the originally intended wealthy.
Maybe$30,000 a year is rich in South Carolina - per capita income $26,132. But it's not inthe rest of the country - per capita income $31,632.
And it'seven farther from rich in the states where AMT hits hardest - New Jersey, New York, Connecticut,California and the District of Columbia, according to a different TaxPolicy Center analysis.
That'sbecause it costs more to live in those states. An analysis by the MissouriEconomic and Research Center shows that when it comes to affordability, theDistrict of Columbia ranks 50th; California, 49; New Jersey, 48; Connecticut,46; and New York 44th.
AMT alsohits families hard. Left unpatched, AMT would apply to 40 percent of marriedcouples with two children and 45 percent with three or more starting with thistax year, TaxPolicy Center says. That's because there are no personal exemptions and nomarriage bonus under AMT.
Awhopping 61 percent of families with incomes between $75,000 and $100,000 wouldface AMT this year, according to that same analysis. While that's above California's medianhousehold income of $59,948, that income level's not wealthy by a long shot.Particularly not in a state where the cost of living is 29 percent higher thanthe national average.
It's easyto see how people such as Clyburn get confused. Yes, AMT does overwhelminglybenefit the top 20 percent of taxpayers. Every year, though, it's more of athreat to the middle class.
Somequestioned not the need for the AMT patch, but the need to include it in thestimulus bill.
"It'sabout 9 percent of the whole (stimulus) bill, which we were going to dolater this year in a tax bill," Sen. Tom Harkin toldThe New York Times. "Why is it in there? It has nothing to do withstimulus. It has nothing to do with recovery. This makes no sensewhatsoever."
He'sprobably right that Congress would take care of the patch later. But can heguarantee it?
Californianswill see little help from other Republican-backed additions to the stimulusbill. Offering tax credits to homebuyers will do little to spur constructionhere, where inventory is more bloated than it is in therest of the country and builders are simplywalking away from developments.
Incometax refunds are being delayed and the sales tax couldgo up a penny.
Reliefguaranteed now is welcome.
