April 19, 2007

The AMT Problem: Giving Credit Where Credit is Due

As is always true in politics, the Congressional debate over the Alternative Minimum Tax (AMT) right now is not just about what's wrong with the tax-- it's also about whose fault it is.

This may seem like a spiteful thing to discuss, but in this case it's important: federal tax cuts enacted in 2001 have set the AMT on a collision course with millions of upper-middle-income Americans. People need to know that the coming AMT explosion was an entirely predictable outcome of conscious legislative decisions that can be reversed.

And the San Francisco Chronicle's editorial board nails it:
Thanks to a lack of foresight, however, on behalf of our former congressional leaders (who failed to index the tax to inflation) and our president (whose 2001 tax cuts pushed millions more people into the range of the alternative minimum tax), you're paying it.
Part of the solution is easy-- increasing the exemption to keep pace with inflation. But part of the solution involves recognizing that the current AMT and the Bush tax cuts are inherently at war with each other.

The Chronicle misses a third point, which is that the tax base of the AMT has been weakened in a way that makes it more like the loophole-ridden regular tax it's designed to back up. See CTJ's plan for more details.

But two out of three ain't bad.


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