Of all the tax issues facing Congress when it returns for a lame duck session after the Nov. 2 midterm elections, the annual rite of patching the Alternative Minimum Tax will be the most urgent.
Unlike the debate over the Bush tax cuts, which will affect taxpayers' income in 2011, the AMT applies to 2010. And the delay in patching it is already causing problems and raising alarms for large numbers of middle-income taxpayers -- as many as 25 million Americans, according to one expert -- who could face a huge increase in their tax payments if Congress doesn't act.
Enacted in 1969, the Alternative Minimum Tax was originally aimed at 155 extremely wealthy taxpayers who had avoided paying federal taxes completely. It was an add-on tax designed to ensure that everyone paid some income tax every year. Since then it has evolved into the primary tax mechanism for taxing high income taxpayers.
Under the original system, taxpayers who earned more than $200,000 -- a very high income 30 years ago -- were required to calculate their taxes differently, resulting in a larger tax payment for the wealthy.