AMT battle comes down to red and blue
TEXT OF COMMENTARY
KAI RYSSDAL: The Bush Administration doesn’t want any part of Democratic proposals to fix the Alternative Minimum Tax. The White House said today the president would veto a proposal from House Ways and Means Committee chairman Charlie Rangel. The House is set to vote tomorrow on Rangel’s plan to raise taxes for private equity and hedge fund managers. That would offset the loss in government revenue that would accompany a temporary AMT patch. Commentator Jeff Birnbaum says the politics of fixing the AMT speaks volumes.
JEFF BIRNBAUM: No one says so out loud but Republicans are not as eager to fix the alternative minimum tax as Democrats are. A nice bit of irony, don’t you think?
The AMT was designed in 1969 to make sure that millionaires couldn’t use loopholes to avoid paying income taxes altogether. But during a rewrite, the AMT was not indexed to inflation, which meant that middle-income people started to get hit by it as well. This year, unless Congress acts, 23 million middle and upper middle-income households will have to pay more taxes because of the AMT.
The people who’d be hit hardest, it turns out, live in blue states. California, for instance, would have 1.7 million more AMT payers this year. New York would have a million more. New Jersey would have 750,000 more and Massachusetts would have 500,000.
Besides leaning Democratic, these states also have relatively high statewide taxes, which figures into the AMT calculation. But the fact remains. Red states don’t tend have as many people looking at an AMT tax increase as blue states do.
It’s worth noting that anti-tax Republicans won’t be rushing to vote for the so-called patch of the AMT in the House. In fact, they will largely vote against it, saying that the tax increases used to pay for the fix are harmful to the economy.
I have no doubt that they believe what they say. But it’s also true that they have less at stake than the Democrats in preventing the AMT from reaching the middle class. If Congress fails to act, there will be a lot more angry Democratic voters than Republican voters.
The silver lining? The only way to finally get rid of the AMT will be a tax reform so sweeping that it will probably also have to solve the other major problems our government faces, from Social Security to health care. The AMT woes could end up forcing the government to finally get down to serious work.
RYSSDAL: Jeff Birnbaum is a columnist for The Washington Post.
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