Members of Congress from both parties have pledged to fix the alternative minimum tax (AMT), intended to ensure that the very wealthy paid some federal income taxes when passed decades ago. Congress never indexed the AMT to inflation, and now it threatens to ensnare millions of middle-class earners if reform gets postponed any further. Under a budget plan offered by Sen. Kent Conrad (D-ND), that turns from a bug into a feature:
President Barack Obama’s Democratic allies in the Senate promise to cut the deficit by almost two-thirds over the next five years, but their budget plan could threaten about 30 million people with tax increases averaging $3,700 in 2012 and after because of the alternative minimum tax.
The alternative is tax increases elsewhere in the revenue code averaging up to $100 billion a year after 2011 to continue alternative minimum tax relief and also curb taxes on people inheriting large estates.
The Democratic plan released Wednesday by Senate Budget Committee Chairman Kent Conrad of North Dakota relies on such boosts in revenues to carve the deficit from $1.4 trillion last year down to $545 billion by 2015.
The minimum tax, or AMT, was enacted four decades ago to make sure wealthy people couldn’t avoid taxes altogethe. But it wasn’t indexed for inflation in people’s incomes, so it gets “patched” every year or so in order to prevent people from being surprised by multi-thousand-dollar tax bills at tax time.
Why would the annual “patch” strategy not get followed in Conrad’s plan? He invokes Pay-Go, that rule passed by Democrats in February and ignored ever since. Without another source of revenue to replace the projected income from middle-class contributions through the AMT, they can’t apply the fix any longer.
Oddly, though, it apparently never occurred to Conrad to cut spending. The budget Conrad will deliver has to fund all of the Democrats’ big-government programs as well as satisfy Barack Obama’s sudden concern over annual budget deficits. The biggest problem with annual deficits is not the lack of revenue but the amount of spending by Congress. Trillion-dollar deficits exist because Democrats added more than a trillion dollars in spending to annual budgets between FY2007 (the last Republican Congress budget) and FY2010. Eliminate all of the spending increases and returning the budget to FY2007 numbers would eliminate almost all of the current deficits.
Instead, Democrats want to spend even more money, and do it on the backs of middle-class taxpayers. They waive Pay-Go for spending and invoke it for taxes. That’s exactly the kind of hypocrisy that has fueled Tea Party determination to kick Democrats out of power in the midterms.