Married with two kids and upper middle class, Patrick and Anne O'Rourke seem to have a very comfortable life. But their tax burden is growing — and come January, more than 40 million other Americans could take the same hit. The problem is they're forced to pay a sort of flat income tax called the Alternative Minimum Tax, or AMT.
"Essentially, they say we're not giving you any deduction for state income tax. We're not going to give you a deduction for real estate taxes. We're not going to give you deductions for your kids," Patrick O'Rourke says. "Last year it cost me about $3,000."
Fixing the AMT, originally aimed at the very rich but now hitting more and more of the middle class, is the top priority for Charles Rangel, the New York Democrat who's the new chairman of the House Ways and Means Committee. Think of him as the new tax sheriff in town.
"Low-income people don't have to pay this tax. The wealthy already have their tax break. This is certainly a middle-income issue," says Rangel.
One problem is that saving the middle class from having to pay the AMT would take revenue from the budget — lots of it. It could amount to $1 trillion over 10 years. Someone would have to make up for it. The question is how.
One possible solution: raising taxes for others. Rangel says he'd go after tax cheaters, close loopholes, and do away with targeted tax breaks for industries like big oil, which got billions in benefits written into the law in 2004. They could be coughing up big time.
"Will their taxes be increased? I'm sorry, the answer is yes. But for the majority of Americans who work every day and want an equitable distribution of the tax burden, they don't have to worry about a tax increase," Rangel says.
On other points, Rangel says the estate tax, which the Republican Congress temporarily abolished, could come back for some, but not most. He's not ruling out an income tax rate increase down the road if it's needed.