Republicans Call for Replacing Alternative Minimum Tax with Alternative Maximum Tax

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House Republicans have called for replacing the complicated Alternative Minimum Tax with a potentially even more complicated Alternative Maximum Tax. The plan, which also proposes permanent extension of the Bush tax cuts, would add more than $5 trillion to the national debt over the 2011-20 period.

Under the GOP plan, taxpayers could choose to continue to pay taxes under the current tax code -- but with no Alternative Minimum Tax and with all of the Bush tax cuts permanently extended. Or they could switch to the new Alternative Maximum Tax, with lower rates than current law and no credits or deductions except for a large standard deduction and personal exemptions similar to those under current law.

Because the plan would repeal refundable tax credits now available to low-income working families, it would be of no benefit to the poorest one-third of Americans. Wealthy families, however, would get huge tax reductions.

To maintain or enhance complexity, the plan would allow couples to switch between the two tax systems annually by divorcing or remarrying. Single taxpayers would be allowed only one lifetime switch between the two systems after their initial choice, unless they get married.

The bill's lead sponsor, Rep. Paul Ryan (R-Wisc.) calls his plan "The Taxpayer Choice Act." But budget-deficit hawks have condemned it as "The Bankrupt America Act," while others have dubbed it "The Divorce Lawyers' Relief Act."

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