More Taxing AMT Idiocy

(Posting may be OK today or tomorrow, by the way, but it will slow up as the week goes on, particularly on Thursday of course.)

Yesterday, President George W. Milhous Bush barked at the Democratic congress as follows (from here, regarding the Alternative Minimum Tax)…

"Members of Congress must put political theater behind them, fix the AMT, and protect America's middle class from an unfair tax hike."

And I should note, of course, that the link above is to an AP story that appeared in the Philadelphia Inquirer, so of course Dubya will be cast in the most favorable possible light. Also, this Courier Times story tells us that Patrick Murphy and the Democratic Congress has already proposed a fix for the AMT, but…

The bill, however, was opposed by every House Republican and faces a White House veto threat due to a proposal in the Democrat's tax plan to offset lost revenue by more than doubling taxes on hedge-fund and private-equity fund managers. The new tax hike would require those managers to pay as much as 35 percent in income taxes on their earnings as opposed to the 15 percent capital gains tax they must pay now.

“The administration does not believe the appropriate way to protect 21 million additional taxpayers from [AMT] liability is to impose a tax increase on other taxpayers,'' the White House budget office said in a statement.

Leave it to Dubya and the Repugs (and Democratic Senator Charles Schumer, to his infamy) to stand up to those poor, oppressed hedge fund managers. I guess, under that bad “Democrat” plan, they may actually have to scale back on their vacation homes, overseas junkets and ritzy perks that the rest of us peasants will likely never see in our lifetimes. O, the human tragedy!

This story tells us…

Not only do these rich individuals have no need of tax breaks, the hedge fund and private equity industries have demonstrated time and again that they are not exemplary economic citizens who deserve privileged tax treatment. While most fund managers are probably law-abiding investment advisors, there are innumerable examples of wrong doing. The major types of failures and illegal activities include insider trading, (initial public offering) IPO manipulation, embezzlement, and defrauding mutual fund investors.2

Defending this tax break are highly paid lobbyists such as Douglas Lowenstein and Grover Norquist who loudly and repeatedly make the claim that taxing hedge fund managers like everyone else will harm the average working family. They claim that taxing hedge funds like normal income will harm pension fund returns. This is wrong on two levels. First, the tax change would apply to hedge fund managers and not investors (many pension funds invest in hedge funds). Second, pension funds do not pay taxes. These lobbyists also claim that it would increase the cost of consumer goods and services because so many stores and chain restaurants are owned by private equity firms and hedge funds. This, too, is preposterous because, again, the tax does not apply to the investors or owners of those businesses but only the investment advisors who manage the funds of those investors. Moreover, the businesses owned by private pools of capital will have to compete with other similar businesses providing consumer goods and services—only now on a level playing field—and they will not be able to arbitrarily raise their prices.

Also, if Dubya and the Repugs really cared about trying to fix the AMT, they could have done so long ago. This story from February 2004 (during the 108th Congress) tells us that Dubya would have had to cancel his precious tax cuts elsewhere to accomplish this, however. When the government loses revenue by abolishing the AMT, it has to make up for it by rolling back the other cuts. Even I know that.

I’m sorry a topic like this isn’t as “sexy” as the WGA strike (don’t get me started), but I care a hell of a lot more regarding money coming out of my pocket than I ever will about whether or not a TV show or movie ever airs again.

Update 11/20/07: And because Dubya has threatened to veto any legislation from the Dems to fix the AMT if the "poor" fund managers are somehow oppressed in his jaundiced eye, this from Patrick Murphy would likely fall victim to his veto crayon also.