More Taxing Nonsense From Dubya

Now we know why our red-state president was trying to make nice with the House Democratic leadership on Saturday; he knew he was going to send another turkey of a budget to Capitol Hill, and he was trying to blow smoke up their butts.

And I have to laugh at the reporting, actually, when our corporate media keeps stating that “the President is proposing painful cuts” to the traditional entitlements (as noted in the story, he’s proposing cuts to or elimination of 141 government programs).

He’s still trying to “drown it in the bathtub,” and always will be. It’s silly to report this stuff as anything other than that. Don’t imply that this is an occurrence that isn’t part of a long-since-etched-in-stone neocon agenda.

We could focus at a lot of what is wrong here, but I want to take a closer look at the alternative minimum tax, which represents but a single issue that is timely since I’m sure many of us are ready to do our taxes by now.

As noted in the CNN story…

(Bush) only includes a one-year fix for the alternative minimum tax, which was initially designed to make sure the wealthy paid their fair share of taxes but is ensnaring more middle class wage earners.

Here are here are detailed articles on the alternative minimum tax. As stated in the Wikipedia article…

The AMT was introduced by the Tax Reform Act of 1969,[1] and became operative in 1970. It was intended to target 155 high-income households that were eligible for so many tax benefits that they wound up paying little or no income tax under the tax code of the time.

In recent years, the AMT has become the subject of increased attention. Because the AMT is not indexed to inflation, an increasing number of middle-income taxpayers have been and will be finding themselves subject to this higher tax.

Here is a scenario of how a family could be affected by the AMT (as noted in the report to Congress)…

…in 1993, a married couple with two children under 17 and a total income of $65,000 would have owed $9,035 in federal income taxes under the regular income tax. Their tentative AMT tax liability would have been $5,200.

Because of tax indexation of the regular income tax and the addition of the new child tax credit, in 1999, a married couple with two children under 17 and a total income of $65,000 will only owe $6,021 under the regular income tax. Their AMT liability, however, remains at $5,200. As shown by this example, indexation of the regular income tax combined with new tax credits has greatly narrowed the gap between regular income tax liabilities and AMT liabilities.

The potential problems of an indexed regular tax and an unindexed AMT have long been recognized by tax analysts. In 1997, approximately 605,000 taxpayers or about 1% of all taxpayers were subject to the AMT.

Preliminary estimates indicate that by 2010, when the effects of both inflation and the legislative changes contained in the Economic Growth and Tax Relief Reconciliation Act of 2001 are taken into account, the number of taxpayers falling under either the AMT or AMT limits on their tax credits under the regular income tax will grow to 35 million (33% of total taxpayers). If the EGTRRA provisions are made permanent, then by 2012, 41 million taxpayers (37% of total taxpayers) would be affected by the AMT.

The individual income tax rate reductions and the marriage penalty tax relief provisions of the 2001 Act are expected to increase the number of taxpayers subject to the AMT. Indeed, many taxpayers in the middle income ranges will find that the AMT will “take back” much of the tax reductions contained in the 2001 Act.

So, in yet another bait-and-switch, the 2001 EGTRRA will giveth, but the non-indexed-for-inflation AMT will eventually taketh away.

And this from the Wikipedia article offers an idea as to why Bushco would have no desire to look at this issue…

The AMT disproportionately affects those who live in wealthier areas with higher cost of living and areas with higher state and local taxes, areas which are primarily represented by Democrats. Thus, many Democrats favor a tax reform of the AMT that would benefit primarily those who would be objectively viewed as wealthy by the standard of the country as a whole or their incomes, although they only live what they, themselves, like to call "a middle class lifestyle". Some Republicans wish to package AMT reform together with extensions of other tax cuts, which Democrats in general oppose.

Because, as we know, as far as the Repugs are concerned, “tax cuts are their Jesus.”

So what would happen if the AMT were adjusted for inflation (Wiki again)?

The Joint Committee on Taxation reports that indexing for inflation would explode the deficit by $370 billion over the next several years.[2] The Center on Budget and Policy Priorities (an advocate for low-income Americans) states repealing the AMT, assuming that the tax cuts of 2001 and 2003 are made permanent and without other tax increases to make up the shortfall, would add $1.2 trillion to the debt over the next 10 years. Deficits would also widen over the next decade, with deficits as far as the eye can see.

So basically, if the Dems were to try and fix the AMT, it would almost automatically require a tax increase and/or such a drastic cut in entitlements that they would get blasted from both barrels of that shotgun, as it were.

And the Repugs would sit back and laugh because their own cowardly non-stewardship would have created yet another mess for which the Dems would end up ultimately paying the price for doing the right thing.

(And this was as we expected, wasn't it?)