The Issues: Tax Reform

CBS News continues an election-year series titled "What Does It Mean To You?" focused on where the presidential candidates stand on major issues and how a vote for one or the other candidate might affect average people's lives.

In this report, CBS News Correspondent Lee Cowan compares the Bush and Kerry plans for reforming an obscure income tax loophole that could penalize thousands of taxpayers.

The Speltz's don't' have much time for politics these days, even though they blame politics for ruining their financial future.

Once a prosperous middle class family, Ron and June Speltz now live paycheck to paycheck - nearly bankrupt - all because of an obscure law that is forcing them to pay tens of thousands of dollars in income tax on money they never even made.

"The only thing that we had left we offered them and they basically said, 'Nope, not good enough. We want more,'" says Ron Speltz.

They are victims of the Alternative Minimum Tax, a deliriously complex portion of the U.S. Tax Code that is running amok, partly because it's never been adjusted for inflation.

In the Speltz's case, it meant a tax bill of more than a quarter of a million dollars. And unless something changes, more than 30 million middle class families could be in AMT hell by the end of the decade.

"It's an issue in the heartland, it's an issue in Silicon Valley, it's an issue down in Texas, it's an issue coat to coast," says June Speltz.

And it's an issue, she says, that is largely being ignored.

Last year when CBS News visited the Speltz's, they were hoping the campaign season would force attention to the issue. They've even gone to hearings on Capitol Hill to make their case as public as they could.

In the end, President Bush did offer a short-term fix that would raise the AMT exemptions for middle class families.

John Kerry says he would also raise exemption levels and apply tax credits to ease the AMT burden.

But both plans are only temporary solutions to a tax that's bringing in so much revenue that it could cost as much as $600 billion to fix - nothing short of a re-write of the current tax code.

The IRS says it's waiting for Congress to do just that.

Some in Congress say they've already acted, but that the IRS just isn't listening.

Which all leaves the Speltz's feeling like "a ping pong ball stuck in the middle," say Ron Speltz. "But we got to keep going."

And they're going right to court. It's the only option they have left.

"We're hoping that once we get that day in court, that that is the point where common sense and fairness will prevail," says June Speltz.

Because so far they've heard little on the campaign trail that makes their family's road ahead any less burdensome.