Taco John
12-05-2005, 12:32 AM
the nation
The issue is taxes
By John Aloysius Farrell
Denver Post Washington Bureau Chief
Washington - House Republicans face a test of character when they return to work this week.
They can follow the example of their Senate colleagues and nudge the country on a path to tax reform.
Or they can waffle on their stated principles and opt to save a windfall for the wealthiest Americans.
A teaching moment is at hand.
The issue is taxes; more specifically, that odious stinker known as the Alternative Minimum Tax.
In 1998, shortly after Newt Gingrich and his band of Republican brothers captured the House, they created the office of National Taxpayer Advocate to serve as the champion of taxpaying Americans.
It did not take long for the advocate to identify - despite all the flaws of our loophole-ridden tax code - the single most unfair feature of them all: the Alternative Minimum Tax.
The AMT was born 35 years ago to ensure that a few rich big shots couldn't use lawyers and accounting tricks to avoid paying taxes at all. But it was never indexed for inflation. As incomes grew over the years, the AMT began to affect more and more taxpayers. It's grown stealthily into a punitive, alternative, shadow tax code.
"The AMT is a vivid example of why our tax code is dysfunctional. ... \[It\] constitutes a second, parallel tax structure," President Bush's own tax reform panel concluded in November.
"Taxpayers who have families are especially hurt," the panel warned. The AMT is "a salient example of a policy or government program gone astray with unintended consequences carrying malign impacts."
The President's Advisory Panel on Federal Tax Reform, as it is formally known, offered Bush two blueprints from which to choose to create a simpler and fairer tax code. Abolition of the AMT is a core provision of both.
The AMT was never intended or enacted as a general tax. It doesn't stop 8,000 of the richest Americans who don't pay any taxes at all. And it's a pain in the neck, with a 12-line worksheet, eight pages of instructions and a 55-line form - on top of the usual 1040 forms.
You would think that members of the Republican House would be jostling to lead a new Boston Tea Party. But, over the years, lawmakers have grown addicted to the AMT.
The prospect of voting for tax cuts, while quietly raising taxes through the shadowy AMT, has the allure of catnip to a politician. If Congress doesn't act, its members can just sit back and watch the money roll in, and spend it on pet projects, special- interest tax breaks and pork.
Ben Bernanke, the incoming Federal Reserve Board chairman, sounded the warning at his confirmation hearings last month. To kill the AMT, Congress needs to come up with $1.2 trillion over the next 10 years in alternate revenues, budget cuts or borrowing.
Congress has passed "patches" that keep the AMT from reaching too far down into the middle class. But the tax still hit 4 million taxpayers in 2005 and will affect 21.6 million next year - with an average increase in their tax bills of $2,770.
By 2015, about 52 million taxpayers will be affected. Depending on how you define it, that's the American middle class.
The Senate at least acted. Beginning this year, the big Bush tax cuts of 2001 and 2003 will, one by one, start to expire. Rather than extending some of those tax breaks, the Senate passed a $60 billion tax cut bill that would, among other things, reduce the AMT by $25 billion over five years. It was a meager "patch," but a start.
House Republican leaders had different priorities. Their $63 billion bill protects the AMT and seeks to make permanent two Bush tax breaks - on capital gains and stock dividends - that are scheduled to expire in 2009.
Neither bill does much for working class families.
A whopping 40 percent of the House tax cuts would go to 345,000 American millionaires, and just 7.5 percent to the 90 million U.S. taxpayers who earn less than $50,000, according to an analysis by the Tax Policy Center here.
The Senate is even stingier with working families, devoting just 6.3 percent of its proceeds to those making $50,000 or less.
But because of its AMT provision, the Senate bill would at least give 52 percent of its tax relief to 28 million Americans who make between $75,000 and $200,000 a year.
When they return this week, the Republican members of the House will start choosing between the Senate bill and the legislation crafted by their leaders.
It is the first step in a process that could lead to real tax reform. Or not.
http://denverpost.com/nationworld/ci_3270271
The issue is taxes
By John Aloysius Farrell
Denver Post Washington Bureau Chief
Washington - House Republicans face a test of character when they return to work this week.
They can follow the example of their Senate colleagues and nudge the country on a path to tax reform.
Or they can waffle on their stated principles and opt to save a windfall for the wealthiest Americans.
A teaching moment is at hand.
The issue is taxes; more specifically, that odious stinker known as the Alternative Minimum Tax.
In 1998, shortly after Newt Gingrich and his band of Republican brothers captured the House, they created the office of National Taxpayer Advocate to serve as the champion of taxpaying Americans.
It did not take long for the advocate to identify - despite all the flaws of our loophole-ridden tax code - the single most unfair feature of them all: the Alternative Minimum Tax.
The AMT was born 35 years ago to ensure that a few rich big shots couldn't use lawyers and accounting tricks to avoid paying taxes at all. But it was never indexed for inflation. As incomes grew over the years, the AMT began to affect more and more taxpayers. It's grown stealthily into a punitive, alternative, shadow tax code.
"The AMT is a vivid example of why our tax code is dysfunctional. ... \[It\] constitutes a second, parallel tax structure," President Bush's own tax reform panel concluded in November.
"Taxpayers who have families are especially hurt," the panel warned. The AMT is "a salient example of a policy or government program gone astray with unintended consequences carrying malign impacts."
The President's Advisory Panel on Federal Tax Reform, as it is formally known, offered Bush two blueprints from which to choose to create a simpler and fairer tax code. Abolition of the AMT is a core provision of both.
The AMT was never intended or enacted as a general tax. It doesn't stop 8,000 of the richest Americans who don't pay any taxes at all. And it's a pain in the neck, with a 12-line worksheet, eight pages of instructions and a 55-line form - on top of the usual 1040 forms.
You would think that members of the Republican House would be jostling to lead a new Boston Tea Party. But, over the years, lawmakers have grown addicted to the AMT.
The prospect of voting for tax cuts, while quietly raising taxes through the shadowy AMT, has the allure of catnip to a politician. If Congress doesn't act, its members can just sit back and watch the money roll in, and spend it on pet projects, special- interest tax breaks and pork.
Ben Bernanke, the incoming Federal Reserve Board chairman, sounded the warning at his confirmation hearings last month. To kill the AMT, Congress needs to come up with $1.2 trillion over the next 10 years in alternate revenues, budget cuts or borrowing.
Congress has passed "patches" that keep the AMT from reaching too far down into the middle class. But the tax still hit 4 million taxpayers in 2005 and will affect 21.6 million next year - with an average increase in their tax bills of $2,770.
By 2015, about 52 million taxpayers will be affected. Depending on how you define it, that's the American middle class.
The Senate at least acted. Beginning this year, the big Bush tax cuts of 2001 and 2003 will, one by one, start to expire. Rather than extending some of those tax breaks, the Senate passed a $60 billion tax cut bill that would, among other things, reduce the AMT by $25 billion over five years. It was a meager "patch," but a start.
House Republican leaders had different priorities. Their $63 billion bill protects the AMT and seeks to make permanent two Bush tax breaks - on capital gains and stock dividends - that are scheduled to expire in 2009.
Neither bill does much for working class families.
A whopping 40 percent of the House tax cuts would go to 345,000 American millionaires, and just 7.5 percent to the 90 million U.S. taxpayers who earn less than $50,000, according to an analysis by the Tax Policy Center here.
The Senate is even stingier with working families, devoting just 6.3 percent of its proceeds to those making $50,000 or less.
But because of its AMT provision, the Senate bill would at least give 52 percent of its tax relief to 28 million Americans who make between $75,000 and $200,000 a year.
When they return this week, the Republican members of the House will start choosing between the Senate bill and the legislation crafted by their leaders.
It is the first step in a process that could lead to real tax reform. Or not.
http://denverpost.com/nationworld/ci_3270271