Hearings last week in the House began to look for a lasting solution to the downward creep problem of the AMT, which could affect taxes for some households with income as low as $50,000 without some changes. See Lori Montgomery, Democrats Look for Permanent AMT Fix, Washington Post, Mar 8, 2007, at D1 (quoting Representative Neal, chair of the select revenue measures subcommittee of Ways and Means, as seeking a permanent fix for the AMT problem and Ways and Means chair Rangel as considering "redirecting" the 2001-2003 tax cuts to fund the solution).
What I found interesting about the new discussion of the AMT problem is the Republican willingness to continue to play the blame game rather than deal with the real issues. Phil English (R-PA) pulled out the old line that Democrats are engaging in "class warfare" for wanting to assist those at the lower end of the income distribution at a potential cost of slightly higher taxes to those at the higher end and asserted that "We're not going to allow our pro-growth tax policies that are expanding the economy to be held hostage to an AMT fix." Id. Now, it seems to me that English is missing the point.
First, for the last six years the Republican-dominated Congress and Administration have passed a series of revenue reduction bills that have given the broadest benefits to people at the top of the income distribution while making a variety of arguments for eliminating "entitlements" that most clearly benefit those at the lower end of the income distribution. Those polices are the real class warfare, because the result is that the have-mores get more. Protecting the more vulnerable in the lower half of the income distribution by asking the more able to pay to bear more of the burden isn't class warfare--it's responsible and equitable tax policy.
Second, it's not at all clear that the Bush tax cuts have been "pro-growth." Just look at the concern, expressed broadly across the pages of the Wall Street Journal and the New York Times, about the likely impact of a continued housing slump on broader economic concerns. See, e.g., Gretchen Morgenstern, Mutual Funds at Some Risk on Mortgages, NY Times (Mar. 14, 2007); Reuters, GMAC to receive $1 billion from GM, NY Times (Mar. 14, 2007); Stephen McMahon, Market Hits More Turbulence, Herald Sun (Mar. 15, 2007). It is certainly not clear that whatever economic expansion the country has enjoyed has reached very far down the income distribution. Economic expansion for the rich accompanied by relative stagnation for everybody else is not a good situation if one cares about democratic institutions. An AMT fix for those on the lower end of the distribution is necessary for those ordinary taxpayers and may be absolutely vital to any continued economic growth in the US, given the importance of middle class consumption spending to the economy. One reason for today's market slump is that investors are worried about the impact of mortgage defaults on retail spending and banks. Stephen McMahon, Market Hits More Turbulence, Herald Sun (Mar. 15, 2007).
The Republicans in Congress and in the White House also say they want to "rein in the AMT." Lori Montgomery, Democrats Look for Permanent AMT Fix, Washington Post, Mar 8, 2007, at D1. But they've had six years to do it and have instead resorted to one-year patches coupled with continued support for making the Bush tax cuts permanent. Id. The one-year patches are one way to claim that tax cuts passed for the primary benefit of the wealthy are not creating as significant a budget problem as they in fact are doing. Len Burman from the Tax Policy Center testified, however, that the tax cuts have "doubled the size of the AMT problem." Id. Bob McIntyre from Citizens for Tax Justice testified that making the tax cuts permanent would cost about $5 trillion dollars between 2011 and 2020 if the increase in interest on the national debt is taken into account and at least the current patches for the AMT are continued.
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