The AMT Reckoning (Envy Tax Bites Democrat Constituents)

Wall Street Journal On-Line ^ | 6 December 2006 | Staff

[shrinkermd]

... Democrats in Congress are saying they now want to address the "wealth gap" even as they deplore and want to eliminate the Alternative Minimum Tax, or AMT. It was a previous crusade against the wealthy that created the AMT. Haven't we learned anything about the perils of tax policy rooted in political envy?

...The latest data indicate that the eight states with the highest percentage of tax filers subject to the AMT all voted heavily Democratic in 2004 and 2006 -- including Massachusetts, Connecticut, New Jersey and Rhode Island. Those voters are now screaming for relief, and the question for Democrats is where they'll find the money. Eliminating the AMT would cost about $50 billion for one year and $1.2 trillion over 10 years, according to the Treasury Department.

Our free advice is that they consider some bipartisan tax reform. What Americans loathe about the AMT is that it first requires filers to comply with the regular IRS tax code with its hundreds of tax forms, work sheets and instructions. But then if they qualify for too many deductions -- for state and local taxes, say, or the child credit -- they must double their pleasure by recalculating their income and filling out separate tax schedules for the AMT. Then they pay whichever tax is higher. It's really a Mandatory Maximum Tax.

[shrinkermd]

"...So here's a possible deal between the Bush Administration and the Pelosi Democrats: Junk the IRS code and use the AMT as the basis for tax reform. The AMT provides at least the crude framework for a much simpler tax code, because it eliminates almost all deductions and special interest carve-outs. It requires only about one-tenth as many tax forms as the regular code. It has a broad tax base and only two tax rates, 26% and 28%.

Yes, a load of sticky tax issues would still need to be negotiated: The double and triple taxation of investment and savings would have to be eliminated, and adjustments would also be needed lest many families with children be socked with a huge tax hike as they are under the current AMT.

The Democrats created the AMT and we suppose it's rough justice that they're now stuck with finding a way out of their own mess. Yes, they could try to create some tax showdown between repealing the Bush tax cuts for "the rich" and AMT relief. But Republicans would rightly portray this as a tax increase and our guess is they'd win that fight. Meanwhile, today the average American sucked into the AMT pays an extra $6,000 of tax to the IRS, and next year some 20 million additional Americans will have to pay this "rich man's tax." Democrats running Congress would get the blame if they do nothing.

[IamConservative]

I hope they rid the land of this vile AMT Tax. That said, it sure is going to be hard for the Dems to do without it looking like a tax cut for the wealthy. I wouldn't be surprised to see them kill the AMT and offset it by monkeying with the graduated income tax scales.

I also look for them to implement more tax credits, a.k.a. "wealth redistribution", as a means of continuing to socially engineer a voting majority using the tax code.

[AndyJackson]

The problem the democrats face in trying to reconstruct a governing coalition is that their polcies have declared war not only on the truly wealthy, but the upper middle class. When their view of class envy is such that two 40year old classroom teachers trigger all of the threshholds that were aimed at the wealthy they lost it.

When the Republicans hold up tax reform to hold out for inhteritance tax elimination - they lost it.

[snowsislander]

Those voters are now screaming for relief, and the question for Democrats is where they'll find the money. Eliminating the AMT would cost about $50 billion for one year and $1.2 trillion over 10 years, according to the Treasury Department.

Well, they could eliminate the Department of Education, which would more than "pay for" eliminating the AMT, but I doubt that the Democrats would do that.

Or they could recognize that tax cuts tend to pay for themselves in increased revenue, but that goes completely against their "tax and spend" grain, so I doubt that the Democrats will do that.

Undoubtedly they will find something else to tax, not recognizing the general trend for such tax hikes to actually hurt revenue collection to the extent that the tax increases damage the economy.

[IamConservative]

When the Republicans hold up tax reform to hold out for inhteritance tax elimination - they lost it.

Can you elaborate? I assume you mean since the couldn't get Inheritance Tax Reform, they did nothing. Nothing about sums up the last two years for those bums.

I agree on the AMT issue. The AMT for all intents will trigger if you are middle class, live in a state that has property tax and you buy a big house. That hits the Dems right in the old demographic.

[goldstategop]

I'm opposed to eliminating the AMT just to benefit a handful of affluent Democrats at the expense of middle class folks. Didn't the Democrats say the rich should pay their "fair share?" That's precisely why I think the AMT should remain on the books. I don't see why every one else has to pay more in taxes just so rich people get to pay less. Wealth redistribution? This conservative is learning to love the AMT - it targets people who didn't vote for us.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[M. Thatcher]

it targets people who didn't vote for us.

Actually, it targets Americans. Including you.

[goldstategop]

If you to want help the Democrats get out of their tax trap, be my guest. I don't see how its our job to make life easier for them and their voters.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[M. Thatcher]

If you to want help the Democrats get out of their tax trap, be my guest.

I am simply pointing out that the tax does not only target Democrats.

[Eagle Eye]

What a great set of Conservative principles! /sarc

[goldstategop]

But the tax hurts proportionately an affluent and Democratic voting segment the most. Its kind of ironic since these are the people who created this tax in the first place. By "tax trap" I meant the Democrats face a choice between raising taxes on Joe Six Pack taxpayers who don't face this tax or cutting back government spending that hits hard at their dependent constituents to pay for an AMT tax cut. Either way, we'd be helping people who won't vote for us if we make it easy for the Democrats to escape hard choices on fiscal policy. They own the problem and now I say let them try to solve it - without our votes. We'll give them on their tax cut issue exactly the same kind of support they extended to us to the Bush tax cuts. Here turnabout is more than fair play. Its revenge best served cold.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[elc]

I hope they rid the land of this vile AMT Tax.

Couldn't agree more. I'm so nervous about doing my taxes in a couple of months.

[BeHoldAPaleHorse]

I believe that, when people advocate policies from a pathological hatred of America, those people should receive the "blessings" of those policies.

Support terrorists? I'd prefer that the next terrorist attack lands on the supporters of the terrorists, not on loyal Americans.

Support the AMT? Fine, the AMT supporters can pay the damn thing.

[goldstategop]

If you think the Democrats are going to extend the Bush tax cuts at the same time they seek to ram through a tax cut for upper class taxpayers, you're sadly mistaken. The Democrats are not the party of the Little Guy.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[M. Thatcher]

But the tax hurts proportionately an affluent and Democratic voting segment the most.

I suggest you educate yourself.

[goldstategop]

People over $200,000 a year income can certainly afford to pay their fair share. My rejoinder to liberals is, you're the ones who insist people who earn more pay more. Why, now is NOT the time to reduce taxes, especially for these folks! I love throwing the Class Warfare Card back into their mug ugly faces.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[goldstategop]

Listen, if these were Republicans, the Democrats would fighting tooth and nail to keep the AMT in place. Since they have no problem putting politics ahead of principle, I don't have a problem with putting politics ahead of principle either. My motto is whatever they're for, I'm against, even if I would normally think it sound policy. I just want to see them hurt badly.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus

[Eagle Eye]

People over $200,000 a year income can certainly afford to pay their fair share

Those who earn $200k take less taxpayer assistance than low income earners or even the middle class. Therefore, their 'fair share' should be closer to ZERO percent.

The word "fair" has lost all meaning in the context of "fair share" of taxes.

You want a fair share? Advocate the Fair Tax and abolish the current tax code.

[Eagle Eye]

I don't have a problem with putting politics ahead of principle either

We noticed!

[goldstategop]

I'm in favor of abolishing the income tax. I want ALL taxpayers treated the same, regardless of income. But we know that's not what the Democrats want. They just want to take ONE tax issue off the table and get away with raising taxes on the rest of the middle class. That's why I'm not buying their AMT pitch. I know liberals like every inch of my naked body.

"Show me just what Mohammed brought that was new, and there you will find things only evil and inhuman, such as his command to spread by the sword the faith he preached." -Manuel II Paleologus