A Problem With Alternative Tax

Re: “Alternative Tax Can Be a Big Blow to Many,” [Personal Finance, Sept. 29].

Problems with the alternative minimum tax are no accident. Republicans and Democrats have been playing a game of chicken with the AMT for years.

Presidents Reagan (1986), Bush (1990) and Clinton (1993) all raised the AMT tax rate and intentionally chose not to index the tax to inflation.

George W. Bush then used the unindexed AMT as a shield to hide the intended cost and distribution of his 2001 tax cut. Republicans planned to repeal the AMT later as a “technical correction.” They knew that Democrat-controlled states such as California would be the first to feel the pain as the AMT vice tightened. Republicans gambled that continuing favorable budget revisions would allow AMT repeal without spending cuts or deficits.

The gamble failed. Both parties have to acknowledge that the projected revenue from the AMT is more of a mirage than any Enron or WorldCom sham: Voters won’t sit still for this underhanded tax. It’s time to get serious about cutting spending and raising taxes to close the rapidly widening gap covered up by phantom AMT revenue.

Keith Jarett

Lafayette, Calif.

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The tax laws concerning the AMT should be changed to allow a taxpayer two years after the exercise of the option to sell the stock before collecting the respective AMT. Also, the current $3,000 maximum capital loss allowed to offset ordinary income needs to be substantially increased (at least to $10,000).

This is a relevant point because now when the stock is sold it is a capital loss subject to the $3,000 annual limit, even though the government expects the full tax to be collected on the unrealized gains. How unfair.

Marvin Karelitz

Calabasas

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Like so many investors who guessed wrong, Ron Speltz points the finger outward, not inward. His statement “ ... I have received nothing” is incorrect. He received the revenue and should pay taxes on it.

Tom Huber

Van Nuys