Bowey knew that some of his hoped-for profits would be gobbled up by the alternative minimum tax, or AMT -- a complicated tax provision that can, among other things, trigger a 28 percent tax on the difference between an option price and the value of the stock the day of the purchase. In other words, Bowey -- whose options allowed him to buy 13,000 shares of his company's stock for $1 apiece at a time when the stock was trading at $75 -- was looking at an AMT tax bill of about $269,360, 28 percent of his "paper gain."

Bowey knew that by exercising his options but not selling his stocks he made himself vulnerable to the AMT, but he assumed that the eventual gains would outstrip the tax liability. Even if the stock dropped by half -- which seemed unlikely at the time -- he figured that he'd have more enough money to pay Uncle Sam.

Then the market nosedived and Bowey's tax bill became overwhelming. All told, Bowey and his wife, Christine -- a Navy officer who has served for 23 years -- owe more than $335,000 in taxes, one and one-half times their combined income. Even if they sold all of Bowey's optioned shares, their tax bill would still outpace their ability to pay.

"It's ludicrous," Bowey says. "We have a huge American flag in our yard, I spent five years in the Army and my wife is still serving. We're very patriotic. And we don't live high on the hog. We're living check to check. But the AMT caught us."

	Print story E-mail story

The Boweys' situation is hardly unique. Stories of AMT woe began flooding the press a few weeks before taxes were due this year, and the tide continues. Thousands of people who bought into their own companies while the market was high spent most of April trying to figure out how on earth they would pay the government for gains they never realized. The AMT discussion forum teems with the outrage and fear of those who are taking out second mortgages on their homes, leveraging their 401K plans and surrendering their kids' college funds to the IRS.

These probably aren't the kinds of stories that the writers of the AMT tax envisioned. The tax was originally designed to affect only the very rich, but as companies handed out options not just to attract talent, but as a way of lessening their tax load over time, those affected by the AMT came to include much of the stockholding middle class. Increasingly, stock market newbies who had unquestioningly acquired stock options along with the free sodas and gym memberships of the tech boom have found themselves subject to a tax law they previously knew nothing about. The flip side of the AMT tax, the AMT credit, may eventually reimburse some of them, but for many it's too little, too late. Meanwhile the AMT tax has become a political wake-up call.

Bowey and dozens of other "AMT victims," as they're calling themselves, aren't taking the AMT in stride. They've decided to get organized.

Silicon Valley has found cause to get political before -- for H1B visas and vouchers, for example -- but the anti-AMT movement stands out. It's a movement of individual discontent, a sudden reaction to what's perceived as a government intrusion into personal finances. These victims aren't political professionals, they aren't holding meetings or launching ad campaigns -- tools familiar to the relatively wealthy and newly enfranchised. Instead, they're going grass-roots: writing earnest group e-mails to their members of Congress, sharing research and launching Web sites.

"It's like a second job," says Bowey, referring to his new political gusto. "But it's worth it. The tax is wrong."

The Free Software Project
Read Andrew Leonard's book-in-progress on Linux and open source -- and post your comments.