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CNN Money Morning

Future Tax Cuts in Jeapordy

Aired September 11, 2001 - 06:41   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
JACK CAFFERTY, CNN ANCHOR: The tax rebate checks are in the mail, and as a matter of fact, I got mine last week. Future tax cuts, though, may be in danger unless Congress votes to change a law that is on the books right now.

David Haffenreffer explains from the "I" desk.

DAVID HAFFENREFFER, CNN CORRESPONDENT: Yes, this is the alternative minimum tax, but it comes at a time -- and this economy has not been a good thing for those who have to keep an eye over the tax receipts coming into D.C. And obviously, we have all of these tax cuts on the books by the Bush administration.

This alternative minimum tax, which is not something that too many people are aware of, could have essentially be effective -- negating over the next 10 or 11 years the tax cuts that Mr. Bush and his administration have managed to put into law.

Currently, this alternative minimum tax is on the books, and there are a couple of choices here for Congress. They can leave the AMT in place, or they can spend billions of dollars to help roll back the tax.

Now, the tax itself was established three decades ago to ensure that very wealthy people paid at least some federal income tax, even if they had substantial deductions and tax shelters. And that is exactly what it targets primarily. But because the tax rate is not adjusted for inflation, and because incomes are adjusted for inflation, generally this tax will begin to affect many more households than anybody ever planned.

In fact, right now, the alternative minimum tax affects about one-and-a-half million households. Now, before the Bush tax cut went into effect, the AMT was projected to hit 17-and-a-half million households by 2010. But now that the tax cut has been enacted, they are looking for 35-and-a-half million households set to fall subject to the tax by that year -- 2010.

So this is all of a sudden popping up on the radar screen of Congress, which now feels some impetus here to sort of get involved and perhaps do something to roll it back so that not too many people are all of a sudden found feeling no benefits of the Bush tax cut at all. So we're going to hear a lot about this in the coming weeks as Congress and all of these cooks in the kitchen down there in Washington try to figure it out.

CAFFERTY: It was Congress that passed the alternative minimum tax.

HAFFENREFFER: Of course, it was. Yes. But they're looking for ways to sort of reignite the economy, not slow it down again...

CAFFERTY: Yes.

HAFFENREFFER: ... which is what the effect will be if they leave it -- just let it sit there like now.

CAFFERTY: Yes. Well, putting those excessive taxes on the books in the first place are dragging on the economy.

HAFFENREFFER: Yes.

CAFFERTY: Now all of a sudden they're walking around wringing their hands saying, oh, we've got to do something.

HAFFENREFFER: Three decades ago...

CAFFERTY: But they caused the problem.

HAFFENREFFER: ...and it's meant to tax the rich, but it's starting to expose too many people.

CAFFERTY: Yes. All right, thanks, David.

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