First things first.

Charles Peters is right ("Tilting at Windmills," January/February). The FICA tax is a more significant burden for most American families than the alternative minimum tax, or AMT. However, it is still important to recognize what has gone wrong with the AMT. As Peters said, the AMT was designed to ensure that wealthy Americans would not be able to abuse "loopholes" to avoid paying their fair share of income taxes. It was the news that many wealthy Americans paid no income tax at all that spurred creation of the AMT. One of the most significant of these "loopholes" has historically been the preferential treatment accorded to capital gains. Today, neither capital gains nor dividends are subject to the AMT. Instead, the "loopholes" that push most people into the AMT are state income taxes, medical expenses, and dependency exemptions claimed for children. It is difficult to envision these deductions as tax abuse. Moreover, because some states do not impose state or local income taxes, the AMT's burden falls more heavily on citizens of relatively high-tax localities, where the cost of living is also higher. So the AMT results in inequities across geographical regions as well as across income levels.

Extending the AMT to capital gains and dividends would generate more than enough revenue to exclude state income taxes, medical expenses, and dependency exemptions from its grasp. Doing so would return the AMT to its original goal--ensuring that the superrich do not pay less income tax than their less wealthy counterparts. While not as important as addressing the FICA tax's inequities, this is still a laudable goal. It is also easier, and would generate substantial revenue. There's nothing wrong with picking the low-hanging fruit first.

Robert Ricketts

Professor of Accounting

Texas Tech University