Income Tax

I've known Howard Gleckman he was a reporter for BusinessWeek covering the federal budget.  Howard is now the principal writer for the Tax Policy Center's TaxVox blog where he puts out a steady series of interesting, well-written, thought-provoking posts on a variety of tax-related topics.

This one caught my eye earlier today in one of those "How come I didn't think about this" moments: While there's a great deal of interest in the individual mandate included in the health care bill, why, Howard asks, does no one complain about what in effect is a mandate to buy income tax preparation assistance.  Here's the money quote:

Friday, the Internal Revenue Service reported a new record, the most federal income tax returns ever to pay no income tax. In 2005, the most recent data available, 7,389 returns with Adjusted Gross Income of $200,000 or more paid no federal income tax. That was up from 2,833 returns the year before.

Why the big jump in non-taxable returns? The income tax law was changed in 2004 to allow the Alternative Minimum Tax Foreign Tax Credit to offset 100% of pre-credit AMT. Previously, it could only offset 90%. Another factor was the lifting of the 50% of AGI limit and the limit on itemized deductions for charitable contributions made between August 27, 2005 and January 1, 2006 for the relief of Hurricane Katrina victims.