Middle Class Tax Bill Shocker

From: "spiker"
Middle Class Tax Bill Shocker

Source:
CBS News
http://www.cbsnews.com/

Middle Class Tax Bill Shocker
http://www.cbsnews.com/stories/2003/10/01/eveningnews/main576053.shtml

CEDAR RAPIDS, Iowa

Oct. 1, 2003
"It's a horrible provision. It has really disparate and unfair impact on
people. We are really sorry about the impact of this tax, but it is not for
us to rewrite the laws, it's for Congress to act." Nina Olsen, IRS
(CBS) They are a picture perfect family. But as CBS News Correspondent Lee
Cowan reports, these Iowa taxpayers are also the picture of desperation.

June and Ron Speltz have been pursued into bankruptcy after they were
forced to pay a huge income tax on money they never even made.
"I had an IRS agent tell me, 'I can't believe the federal government is
doing this to you. If it were me, I'd be looking for a building to jump off
of,'" says June Speltz.

The Speltzs owed the government $210,065 on top of the $53,000 they owed
the state.
"How could our tax bill be higher than the president's tax bill?" asks June
Speltz. "That just doesn't make sense."

The tax bill was nearly three times their annual income.
"The only thing we've got left is the house, and they want that too," says
Ron Speltz.

Kiplinger's Magazine put their nightmare into numbers.

It started when the Speltzs took advantage of stock incentives offered by
Ron's company, McLeod USA.

He bought $800,000 worth of stock at a fraction of the price.

But when he sold that stock it was worth only $1,500.

Still, under a little understood provision in the U.S. tax code, he was
taxed on the full $800,000 anyway.
"It's legalized extortion," he says. "You look up 'extortion' in Webster's
- there it is. This is exactly what is going on."

The culprit: the "Alternative Minimum Tax" or AMT for short. Never heard of
it? The IRS warns you're about to.
"What's going to happen is that 35.5 million taxpayers, if they didn't know
the AMT existed, are going to get letters from the IRS saying, 'Oh by the
way, you thought that you paid your income tax timely and properly, but
you're wrong and here's your bill," says Nina Olsen, a National Taxpayer
Advocate for the IRS.

The AMT was originally designed 34 years ago to hit only the rich. The
theory? Since their deductions sheltered them from paying taxes under the
ordinary set of rules they should be saddled with a second, tougher set of
rules to make sure that they did. The problem: it was never adjusted for
inflation, so the rich then, are middle income now, which means virtually
anything that lowers your taxable income can trigger it. Unfair? You bet,
says the IRS.
"It's a horrible, provision. It has really disparate and unfair impact on
people," says Olsen. "We are really sorry about the impact of this tax, but
it is not for us to rewrite the laws, it's for Congress to act."

For now, it's all victims, like the Speltzs, can pray for.
"When it comes to protecting me, who's my Homeland Security? Because I'm
getting relentlessly attacked," says Ron Speltz.

All by a creature of Congress left to run amuck, destroying the very
families it was designed to protect.