Sylvia Smith, writing for the Fort Wayne Journal Gazette, has a story on the Alternative Minimum Tax. The AMT is a secondary calculation on tax obligations, originally designed so that rich people paid at least some tax if they were too successful using exemptions and the like for tax avoidance. Unfortunately, the AMT was not indexed to inflation and now threatens middle class tax payers. In years past, Congress has passed band-aid fixes that temporarily exempt taxpayers of more modest means.
This year, Republicans are blocking Democratic efforts to save middle class taxpayers from the AMT because the Democrats’ proposals involve taxing wealthy taxpayers more heavily to avoid increasing deficit spending.
According to the Tax Policy Center, a joint program of the Urban Institute and the Brookings Institution, nearly half of all taxpayers with incomes less than $100,000 will have to pay the millionaires’ tax next year unless Congress changes the law. This year, fewer than 1 percent of those taxpayers were subject to the alternative minimum tax.
The idea behind the alternative minimum tax, enacted nearly 40 years ago to prevent 155 very rich families from sheltering most of their income, was to make sure everyone paid a minimum amount.
. . .
The House bill includes higher taxes for some well-off people to offset the cost of the patch because Democrats have insisted any new spending or tax cuts be paid for.
Bush says he will veto the House bill. Mark Souder is opposed to the bill because he would prefer to add to the deficit than tax the wealthy. Mark Souder: Champion of Red-ink Republicanism.
It’s a legitimate debate as to who should pay taxes:
Current status – Middle class taxpayers.
Democratic preference – Rich taxpayers.
Republican preference – Our kids (with interest).
You are being way too generous to some of the Democrats on this one for a couple of reasons. First, I understand that it is only the House Democrats who are behind the particular offset to the “tax loss” that would be incurred by changing the AMT, not the Senate Democrats. The House Democrats support treating “carry interest” as ordinary income rather than as long term capital gains, as is currently done. This is a change that would mean little to the vast majority of the “wealthy” or for that matter high income tax payers. The people who would end up paying more taxes are people who manage hedge funds and I believe some private equity operations. Without getting detailed something that looks a lot like interest income is treated as capital gains, and these people are in effect paying themselves with something that is treated as long term capital gains and paying an income tax at a flat 15% rather than ordinary income rates.
I think that the house Democrats are correct on this issue (even the relatively conservative “Economist” finds this provision of the IRC bizarre), but they are running into flak from the Senate as well as from Bush, and the Democrats control the Senate last I checked. I’d guess that a lot of hedge fund managers, who live overwhelmingly in the northeast, are also big time campaign contributors to Senators. I’ll turn to a bit a speculation here, but I’d guess that Democratic Senators from the Northeast (particularly NY and southern New England) have very little interest in seeing this change to the Internal Revenue Code as that is the region of the country that would pay the tax.
It is a legitimate argument as to who should pay taxes. In my opinion, all of the powers that be have it wrong.
I don’t see any justice in making any one person pay any more for governmental functions, unless they use more of the services than others. In fact, I see making any one class of people pay more than any other class inherently unjust, unless that classification is based on user fees.
No one of us uses the protection of the military services any more than anyone else, but yet many of us pay a great deal more than others. Why is that fair or just? If I use the roads more, I should pay more. If I don’t use trains, I shouldn’t be paying for them. Etc.
I know, this is an infusion of logic into the debate, and as we all know, it’s emotion that carries the day- or tortured logic, such as the notion that one class should pay more because they can. That’s still nothing like justice.
I’m not sure if that’s true. If the military is protecting my $5,000 trailer at the same time it’s protecting someone else’s $100 billion oil business, who is using the service more?
Times like these, amending the Constitution to require a balanced budget sure seems like a good idea.
Great reply at 9:44. Doug Masson for Congress!
Doug –
And how many people does your trailer employ, and what does it produce, vs. his oil business.
Or does he run the oil business out of his garage by himself, while keeping the $100 billion in his matress?
Look at who pays the AMT. It is mostly educated, well off white liberals from New York and California. These people are not the base of the Republican party. In fact, as a Republican, these are the people that I think NEED to get screwed on taxes!
Of course, with my Lake County property tax bill this year, maybe I should see if I get hit by AMT before I advocate keeping it!
Parker–
Those employees that the oil business is so good to employ are paying taxes to protect their $5,000 trailers. There’s still the matter of how much should be paid to protect the $100 billion oil business.
Unless you think the oil business should pay less because of the “service” it provides the government by employing its citizens.
I’ve often read in news reports that Bush pays for a lot of things Congress won’t approve with ‘discretionary spending’, meaning it’s off the record. I’m not sure where this money comes from or what the criteria are for off the record spending. A lot of Iraqi spending seems to be discretionary.I’ve never been so aware as I am with the Bush administration how much expenditure isn’t a part of the official record.Maybe we should better get a handle on this discretionary spending by the president before we seek to pass a required balanced budget for Congress.
T – And the apple is still not an orange…
(and if you respond I will become increasingly obscure and off-topic – be warned!)
But it is a fruit.
Ah, but the harpies of the shore have plucked the eagle of the sea…
Ok, Doug, so you picked the extreme as the example for the average. How about we discuss individuals here? Consider again- why should I, not an owner of an oil conglomerate by the way, pay more in taxes to support a military that is doing something I don’t believe in anyhow, than another guy down the street who perhaps doesn’t make as much as I have this year?
This is an equity question. For the average taxpayer.