Sunday, April 08, 2007

progressive taxation

House Democrats have a big idea--permanently fix the Alternative Minimum Tax ("AMT"). The AMT, for those of you who aren't aware, is something set up in 1969 to prevent millionaires from hiring clever tax attorneys to avoid paying taxes. But stupidly, lawmakers then never indexed the AMT to inflation. As a result, over the years more and more middle class have been sucked into its powers.
Under it, affected taxpayers have to do a second tax calculation without claiming popular deductions like those for state and local taxes that they have come to rely on. It is akin to a flat tax of 26 to 28 percent.

But the tax is expanding at a rapid pace, partly because it is not adjusted for inflation. It can hit people with incomes as low as $50,000 and if left unchecked is expected to affect 23 million households during the 2007 tax year — up from 3.4 million last year.

Bush sold his tax cuts by counting on this increasingly regressive tax's revenue to make is tax cuts seem smaller. Foolish Republicans (and some Democrats) bought into this scheme, shifting America's tax burden from the wealthy to the middle class.

But now there is hope for change:
Between now and the end of May, House Democratic leaders hope to draft a permanent overhaul of the tax that would effectively exclude anyone who earns less than about $200,000 a year — about 97 percent of taxpayers.

The details are still being worked out as to how to make up the missing income. Some ideas are to jack up the rates for those who make over $500K, and then those over $1M. Others hope to cut wasteful spending (might I suggest Star Wars II and all those no-bid contracts for Iraq) to make up the gap, or a combination of the two and the new PAYGO budget rules.

This was the last paragraph of this New York Times article, but a good one:
After his re-election in 2004, Mr. Bush vowed to overhaul the income tax and abolish the alternative minimum tax as part of the process. But even though he received recommendations from a handpicked advisory panel, Mr. Bush ignored the proposals and never came out with a plan of his own.

Catch that last one? He had a handpicked "tax reform" panel, but doesn't really care about reforming taxes, so he never came out with a plan. Just like Iraq. Senate Democrats forced the Iraq Study Group on Bush, with its handpicked wise old men (and Sandra Day O'Connor) of Washington, and its plan was also ignored by Bush. But wait you say, Bush adopted a new strategy. Actually, no, he just did John McCain and Joe Lieberman's strategy if you want to call throwing thousands of more troops off a cliff a strategy.

I will say it again: Joe Lieberman is dead wrong on everything he touches. He has the midas touch when it comes to policy and politics. Whatever you do Democrats, don't listen to him. And Republicans, please listen to Joe, Democrats would like to control Congress for another 35 years.

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