Dems slow to repeal, reform the AMT

The end of tax season should be a cause for some celebration as the onerous chore is finally complete, but for millions of Americans next tax season could be dramatically worse due to the ever-widening reach of the Alternative Minimum Tax (AMT).

Originally created in 1969 as a stop-gap to prevent 155 wealthy individuals from dodging their tax obligations, the AMT was certainly never meant to ensnare the 4 million taxpayers it has today. Dramatic changes to tax law in the 1980s and 1990s, which failed to index the tax brackets for inflation, coupled with a blown opportunity to completely repeal the AMT in 1999 as a result of a presidential veto, has left the AMT on the books, haunting both taxpayers and policymakers alike.

In fact, if Congress does not act this year, the growing monster that is the AMT will creep into the pocketbooks of 23 million Americans come April 15, 2008.

The new majority claims that reform or even repeal of the AMT is a priority. So how much money did they set aside in the budget resolution to accomplish this reform?

Zero.

That’s right, a budget resolution that already proposes the largest tax increase in American history is completely silent on ways to reform the AMT. So how do we square the majority’s claim that they intend to address the AMT with their do-nothing budget?

Effectively, the majority is holding those 23 million taxpayers hostage in an effort to vastly increase tax rates. According to an estimate by the Urban/Brookings Tax Policy Center, in order to repeal the AMT the majority would have to increase the top three brackets substantially. The study estimates that the majority would have to increase the 28, 33 and 35 percent brackets to 32.2, 38 and 40.3 percent respectively. On top of the already enormous tax increase in the Democrats’ budget, this level of confiscatory tax policy is a recipe for a quick and nasty economic slowdown.

Thanks to the 2001 and 2003 tax cuts, the majority of American taxpayers will receive a higher than average tax refund this year — $2,394, up from $2,314 last year. While the pro-growth policies enacted by Congress have expanded the economy, created new jobs and met the social priorities of our society, the future of tax policy remains unclear in Washington, as the new Democratic majority threatens to put the tax hammer to working families and small-business owners.

As the ranking Republican on the House Ways and Means Select Revenue Measures Subcommittee and co-chairman of the Congressional Zero AMT Caucus, I’ve been a long-time proponent of AMT repeal.

There is strong consensus on both sides of the aisle that the AMT is bad policy in its current form, and although we have been avoiding expanding the reach of the AMT through the use of annual “patches,” I believe a comprehensive solution is more desirable. In my view, we must abolish the AMT, not simply try to fix what is unfixable.

This Congress, I have introduced legislation, H.R. 1366, to permanently repeal the individual AMT. Over the years more and more taxpayers have been subjected to this parallel tax system that arbitrarily and sometimes unpredictably deprives them of the tax preferences they’ve planned for, and negates the very benefits that have been successful in igniting the engines of economic growth. Abolishing the AMT will not only rid our tax code of an arcane and unfair policy, but will also remove a significant barrier for economic growth in the American economy.

While I sincerely believe that a bipartisan consensus could be formed to take this obviously stifling, grotesquely complicated tax law off the books, the new majority has so far chosen to go it alone — forfeiting attempts to forge a bipartisan bill.

That’s a real shame. Afterall, partisanship wrapped around a short-sighted version of class warfare created this monster, and it was partisanship that expanded the AMT in the 1980s and saved it in the 1990s, when many of the same people who now claim they care championed the Clinton veto of AMT repeal.

Washington needs to move past partisanship and take a fresh look at repealing this tax. What a shame it would be if we squandered this opportunity to extend prosperity to millions of Americans and instead allowed the alternative tax to become the tax. The real lesson to be learned from all of this is the clear need for the fundamental reform of our tax code.

English is the ranking member of the House Ways and Means Subcommittee on Select Revenue Measures.

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