Several vocal members of Congress are calling for Alternative Minimum Tax reform, claiming to rescue the middle class. What the media aren’t telling you is that these are the same politicians who helped created this monster.
Look at examples of the media coverage:
· “House Democratic leaders, in an effort to upstage Republicans on the issue of tax cuts, are preparing legislation that would permanently shield all but the very richest taxpayers from the alternative minimum tax,” reported The New York Times on April 9. “Democrats Seek to Lead the Way in Tax Overhaul,” was the headline.
· CBS “Evening News” called AMT reform a “top priority” for Rep. Charles Rangel (D-N.Y.) on Nov. 14, 2006, giving the congressman credit for trying to fix the problem.
And here’s House Speaker Nancy Pelosi’s (D-Calif.). March 21 press release: “The Democratic House budget resolution protects 19 million middle-income American families against the Alternative Minimum Tax (AMT) this year and creates a reserve fund accommodating a permanent fix to the AMT.”
Pelosi and Rangel are just two of the 76 sitting House members who voted for the AMT tax increase under President Bill Clinton in 1993, and against AMT repeal in 1999, along with 139 other House members. (See a list of those who voted in 1993 here, and in 1999 here.)
Originally a soak-the-rich tax to catch a couple hundred taxpayers, the AMT has expanded and is now likely to affect more than 23 million households during the 2007 tax cycle, the Tax Policy Center estimated.
Now the parallel tax structure has Democrats and Republicans clamoring for reform because the AMT threatens to hit middle-income families with higher taxes.
According to Business & Media Institute adviser John Berthoud, “more than half of all families with three or more children will be subject to the AMT.” Berthoud, president of the National Taxpayers Union, was citing data from a Treasury Department economist.
Inflation? Forget About It.
The 1969 Congress created the AMT after finding out that 21 millionaires had managed to pay no income tax in 1967. But changes made in 1993 and the failure to index the tax to inflation sent this soak-the-rich scheme careening toward middle-class households.
Congress voted in 1993 to increase the top rate of the AMT to 28 percent, according to Americans for Tax Reform.
The very same politicians crying for reform now: Sen. Chuck Schumer (D-N.Y.), Sen. Harry Reid (D- Nev.), Sen. Barbara Boxer (D-Calif.), as well as Rangel and Pelosi all voted for that increase.
Two days after the passage of those changes, even The New York Times could read the handwriting on the wall.
“The combination of higher A.M.T. rates for all, combined with higher regular tax rates on higher incomes, will in effect mean that the A.M.T. can now trap some upper-middle class people who never had to worry about it before,” wrote John H. Cushman Jr. in the Aug. 8, 1993, Times.
Congress did not index the AMT structure to inflation, like the rest of the federal tax structure, so as time passed more and more taxpayers have been impacted.
“[I]t ignores the principles that have led us to the sound economy we enjoy today and emphasizes tax reduction for those who need it the least,” Clinton told the House of Representatives.
Some of the very politicians who voted for increased rates and voted against the AMT repeal in 1999 are now complaining that it must be reformed, yet the media rarely mention it.
CBS “Evening News” didn’t mention it on Nov. 14, 2006, although they gave Rangel credit for making reform a “top priority.”
It wasn’t brought up by NBC’s Tim Russert in the “Meet the Press” interview with Rangel on April 1, 2007, either.
The New York Times did assign blame for the AMT explosion in its April 9 article, but not to any specific politicians.
“The reach of the alternative tax is expanding rapidly, for two main reasons. The first is that the tax is not indexed for inflation … But an equally important reason stems from Mr. Bush’s tax cuts of 2001 and 2003,” wrote the Times.
Blame It on the Cuts
The Times was not alone in blaming the tax cuts for the AMT time bomb that gets worse every year. The Washington Post, CNN.com, and “The Early Show” on CBS are just a few news outlets that linked the cuts with the AMT.
“The other reason it’s hitting so many people has to do with the tax cuts of 2001 and 2003,” said Vera Gibbon’s of Kiplinger’s Personal Finance Magazine on the Feb. 23, 2006 “Early Show.”
On March 8, 2007, The Washington Post included Leonard E. Burman, who said, “The tax cuts have doubled the size of the problem.” The Post identified Burman as “the director of the Tax Policy Center, a joint project of the Urban Institute and the Brooking Institution.” Both the Urban Institute and Brookings are liberal think tanks.
The Post did not include the opinions of any of the conservative groups that deal with taxes such as Americans for Tax Reform (ATR), the National Taxpayers Union (NTU) or the Tax Foundation.
ATR disputes the claim that the Bush tax cuts were responsible for the AMT crisis.
“The surge is not the result of the 2001 and 2003 tax cuts but the AMT tax increases of 1990 and 1993 and the failure to index income exemptions to inflation,” said Grover Norquist, ATR president, before the House Ways and Means Committee on March 7, 2007.
Norquist explained the “surge”: “In 1990 and again in 1993 Congress raised the individual income tax. Knowing this would knock taxpayers off the higher revenue raising AMT and into the regular income tax, Congress also raised the Alternative Minimum tax rates. This ensured all the people already paying the AMT stayed in the AMT system but also pushed more taxpayers into the AMT.”
ATR’s chief economist, Daniel Clifton, said politicians’ push to raise other taxes to pay for AMT Reform is a trap, and that they “are using the AMT as an excuse to raise more taxes so they can spend more money down the road.”
An editorial in the Wall Street Journal on Feb. 23, 2007, agreed that the cuts were not responsible for the AMT increases, but pointed to a political game “to use the AMT as an excuse to justify repealing the Bush tax cuts.”
“It is unconscionable that members of Congress who created this problem by raising tax rates and failing to index for inflation and then subsequently voting against repealing this tax six years later are now seeking to rearrange the chairs on the Titanic by forcing nearly $1 trillion of tax increases to ‘pay’ for AMT repeal/reform,” Norquist told the Ways and Means committee.