Alternative Minimum Tax Reform Now Part of the Senate Stimulus
Oy vey. Sen. Chuck Grassley (IA), senior Republican on the Finance Committee, just won approval of a one-year fix for the alternative minimum tax as part of the upper chamber's stimulus bill, at a cost of $70 billion over 10 years.
Anyone looking for background on what the AMT means for taxpayers can find it here. But what this means for Congress is a potentially huge headache.
Exempting taxpayers from the AMT is an unsavory but necessary annual task for lawmakers, largely because the tax is too costly to permanently repeal without adding politically dangerous weight to the deficit. Fiscal conservatives in the House, led by the Blue Dog Democrats, almost always insist on offsetting the cost of the AMT fix -- but they're usually forced to cave in order to get the fix through the Senate.
Putting the annual AMT fix on the Senate stimulus isn't a bad idea at all from Grassley. But it's the very definition of a non-stimulative addition to the bill -- and it was going to get done anyway. Not to mention that the Obama administration opposes fixing the AMT in this format, as House Ways and Means Committee Chairman Charles Rangel (D-NY) has said.
Josh
Matt
Eric
Wait a minute: If the fix was going to happen anyway, how is this a bad thing?
Sure, maybe the stimulus is not the best place to deal with AMT. But a Democratic "compromise" which gives GOP something they were going to get anyway seems like a rather wily political move.
Please explain.
January 27, 2009 4:57 PM | Reply | Permalink
So that's two caves in two days with nothing in return. Pretty soon this is going to start looking like another Republican bill.
January 27, 2009 5:57 PM | Reply | Permalink
Yeah, except for that HALF A F'N TRILLION IN SPENDING!
The chronic complainers are starting to sound like pigs at the trough, squealing because there's not enough slop dumped in to sate their arbitrarily defined appetites.
January 27, 2009 6:36 PM | Reply | Permalink
Again, I don't see how the Democrats "caved" by agreeing to do something they were going to do anyway.
January 27, 2009 8:24 PM | Reply | Permalink
The only problem I see is that if they insist on keeping this package under, what, $825B, then that's $70B taken up by something that would eventually get passed on its own anyway.
That's another $70B less in actual infrastructure spending.
January 27, 2009 6:06 PM | Reply | Permalink
Hmm....good catch. A backdoor way of cutting the package by $70B. The simple solution is to agree to include it but not to count the cost (fictional anyway) in the total price tag of the bill. The R's have been arguing for years that the cost of fixing the AMT should not require offsetting increases or spending cuts. Hoist them on their own petard.
January 27, 2009 6:15 PM | Reply | Permalink
I'm glad at least SOMEBODY figured out what's going on here. And if anybody thinks this is the last bite of this kind that will get taken, I've got some swampland ^H^H^H^H^H^H^H^H^H lakefront property in Florida to sell you.
Of course, our usual clueless Left-bashing mainstream Dem shills will NEVER figure it out.
January 27, 2009 6:53 PM | Reply | Permalink
Didn't you say you were leaving?
Oh well, not like you have any credibility to damage...
January 27, 2009 7:26 PM | Reply | Permalink
And by the way, the above comment is just pure speculation, but of course, it's not like you're going to let facts get in the way of your frantic trolling.
January 27, 2009 7:27 PM | Reply | Permalink
Trolling? Pot meet kettle, Strosczek. This site has majorly sucked ass ever since you and FreeRider started your anti-dissent trolling. Insults abound from you, yet I rarely see an argument. Offer something constructive and leave the insults for the politicians.
January 27, 2009 7:54 PM | Reply | Permalink
The cost of a permanent fix is an illusion. How is a "permanent" fix more costly than a never-ending succession of yearly fixes?
BTW, it doesn't need to be repealed - just permanently updated to its inflation-adjusted original brackets, which is pretty much what the yearly patches do.
January 27, 2009 5:02 PM | Reply | Permalink
Changes would have to be made to the existing brackets to make it revenue neutral. There's no way to make a permanent fix without actually increasing someone's taxes. There would inevitably be winners and losers and the fight would be over whether the winners were the rich, the middle class or the working poor.
So, being Congress, rather than have that unpleasant fight, they just treat it as an automatic increase in the deficit that doesn't show in the projections and only shows up on the books after they vote on the Final Consolidated Omnibus Congloborated Budget Reconciliation and Unsavory Pet Project Act of [fill in year] that rolls all the overdue budget bills from the previous year into one last minute monstrosity.
January 27, 2009 5:11 PM | Reply | Permalink
But they just change the brackets every year. The reason they don't want to make this a permanent fix is so they can count the revenue from not fixing it in future years. But it's a fiction. They're ALWAYS going to fix it every year. So just make the fix permanent already.
January 27, 2009 5:16 PM | Reply | Permalink
Sorry, not brackets, rates. I meant rates. Brain fart.
And I think we more or less agree. I just don't think its a problem that Congress is institutionally capable of fixing without presidential cover. Its turned into one of those indispensible little lies, like "constructive notice" or that imaginary "outside source of income" the student loan people were always insisting I could fall back on to make up for the difference between what they'd lend me and what I had to have to get through another semester of law school without starving.
January 27, 2009 5:51 PM | Reply | Permalink
They certainly seem to be institutionally incapable, but I'm damned if I can figure out why. This one seems pretty simple. Just make official the fixes that everyone knows are going to be made anyway. What's so hard?
January 27, 2009 6:01 PM | Reply | Permalink
Because they budget on the basis of the CBO's revenue projections and the revenue projections assume no AMT patch. If they permanently fix the AMT without fixing the revenue hole it leaves, they can't pass appropriations bills on the assumption that its going to be in the budget.
January 27, 2009 8:15 PM | Reply | Permalink
AMT is just another broken ATM.
January 27, 2009 5:15 PM | Reply | Permalink
Can someone explain how they come up with a 10 year cost for a one year fix? Is that correct, or a typo? Is that saying the cost of the debt required to fund the 1-year fix for 10 years plus the actual loss in tax revenue for the one year is $70B?
January 27, 2009 6:04 PM | Reply | Permalink
It seems like some on the Left are just as willing to set up Obama and the stimulus for "failure" as the those on the Right.
So what else is new.
January 27, 2009 6:04 PM | Reply | Permalink
Obama: "I have decided to put a trillion dollars into magic ponies."
The Left: "WTF! SIROTA SAYS WE NEED 1.2 TRILLION IN PONIES!!!"
January 27, 2009 6:38 PM | Reply | Permalink
That should be Krugman.
January 27, 2009 7:17 PM | Reply | Permalink
Ok, I am listening to softball and the republicans are whining about the corporate tax rate once again. The rate is not reality. American corps pay less in taxes than any of their counterparts overseas because of the stupid write-offs. Obama should propose a 10% gross revenue tax rate and shut these bozos up. Cut out the corporate welfare write-offs. Fox hasn't paid taxes for 5 years now notwithstanding the 35% rate. What a bunch of bullshit garbage. Shut them down Mr. Obama. This is absurd.
January 27, 2009 6:36 PM | Reply | Permalink
I never understood why "the fix" is to exempt a percentage of the people who are inappropriately being targeted with the AMT and lose revenue rather than rejiggering the AMT to serve its original purpose. Wouldn't it be more sense to just adjust for inflation so the AMT continues to hit the people it was intended to hit when first enacted in the 1970s? This would actually increase revenue, and have the tax hitting millionaires instead of those making $200,000 with two or more dependents who are still paying the tax despite the "Fix" while most really high income folk remain completely unaffected by it? What am I missing?
January 27, 2009 7:59 PM | Reply | Permalink
High income taxpayers are unaffected because they lose their miscellaneous deductions. The AMT takes your regular taxable income, and adds back "preferences" such as miscellaneous deductions. Then you compare the tax under AMT and the regular tax, and pay the higher of the two.
Miscellaneous deductions start to be phased out at around $200,000 (I think - I never remember the exact numbers for the beginning of the phase-out or the final income level where miscellaneous deductions are completely disallowed).
For high income taxpayers, since they don't get their miscellaneous deductions, there is no preference to add back, so they aren't ever subject to AMT. That's why they're unaffected. If you want the millionaires to become subject to AMT, the law will have to be changed more extensively than making the inflation adjustments. The entire section of the law will have to be re-written.
There are other details about the differences between regular tax and AMT (like the different tax rates), but the miscellaneous deductions are the biggest difference.
January 27, 2009 8:17 PM | Reply | Permalink
Ok, off topic, but this is a huge f'n problem, big time. The clintons made 6 mill off of foreign sources last year and she is secretary of state? WTF?
http://news.yahoo.com/s/ap/20090128/ap_on_go_ca_st_pe/clinton_finances
And, they made 1 mill off of domestic payoffs? This really is pathetic and beyond the pale. How can she have any credibility as secretary of state with these bribes? Not in a million years. Pathetic and sad.
January 27, 2009 8:46 PM | Reply | Permalink
Can you imagine the novels of talking points Republican strategists had built up against Clinton had she won the Democratic primaries?
January 27, 2009 9:38 PM | Reply | Permalink
I don't think that I could possibly fathom the talking points that the republicans could generate. Incidentally, I don't think that the clintons would have won the general in any event and I don't think that mcbush would have picked rambo if she won the primary. It's kind of like the slippery slope argument. That dump truck of bullshit backing up is screaming at this point. Pathetic, unamerican, and totally typical clinton garbage. I really wish that they would ride off into the sunset and let the country heal itself. Pathetic.
January 27, 2009 10:26 PM | Reply | Permalink