Upon researching the history of AMT and the infamous 155 high-income taxpayers that paid nothing in income taxes in 1967, we came across a news story from the Washington Post from May 12, 1968. The headline read “20 Pct. Minimum TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. on Rich Urged by RFK.” The story states that at the time, then-New York Senator Robert Kennedy was one of three candidates for the Democratic presidential nomination. Unfortunately, 25 days after this story ran, Kennedy was assassinated at a campaign event in Los Angeles. You can purchase the story from the Washington Post here.
The story, written by long time business reporter Frank C. Porter, begins as follows:
Sen. Robert F. Kennedy (D-N.Y.) proposed yesterday a 20 percent minimum income tax on wealthier Americans as part of a comprehensive economic program to insure that all Americans share in our increasing prosperity.
Another highlight from the story is that Kennedy suggested scaling back certain deductions that gave rise to the minimum tax issue in the first place:
Kennedy also suggested…a review of such tax loopholes as the 27 ½ percent depletion allowance for oil operations, exemption of interest on State and municipal bonds and the failure to tax capital gains on inherited property.
The author credits the 20 percent minimum tax as being the “most original proposal” that Kennedy set forth. The story closes by describing the issue at hand:
Although the top tax rate on personal income is 75 percent (cut from 91 percent in 1964), very few rich people pay anywhere near that because of lower-taxed capital gains, interest from tax-exempt bonds, investment in oil properties, tax-saving charitable deductions and the like. Some, in fact, pay no tax at all on incomes of more than $1 million annually.
Kennedy conceded that reform of these tax loopholes will take time. But he said it would be relatively simple to help mitigate the inequity by requiring all those making more than $50,000 to pay a tax of at least 20 percent no matter what the source of the income. “It should be enacted now,” he said.
Upon further review, if it is necessary to enact a minimum tax due to the unwillingness of politicians to close loopholes, it makes sense to do it the way RFK suggested. Just have a taxpayer write down his income, broadly defined, and have him multiply it by 20 percent. If that number is higher than his tax under the regular system, then he must pay that “alternative” minimum tax. It would be a much simpler method than we have today.
The best solution, of course, would be to get rid of the loopholes and unjustifiable deductions altogether for all taxpayers, which is what makes the current AMT a mixed blessing. It gets rid of some unjustifiable tax preferences, albeit in a complex and highly inefficient manner.
For more on the AMT, check out our section on the topic that includes links to all of our work on the topic, including a piece on how the Bush tax cuts and AMT intertwine. Also, you can check out this table to see how much the minimum tax actually raised in terms of revenue and the number of taxpayers that it hit for every year since its inception in 1970.Share