Democrats Tilt Stimulus Toward the Affluent With AMT Fix
By Michael Barone, Thomas Jefferson Street blog
Tom Edsall, longtime Washington Post political reporter now at the Huffington Post, has a splendid post on the stimulus package, pointing to an issue I've mentioned frequently over the years: the Alternative Minimum Tax. This tax, originally intended to prevent millionaires from completing avoiding income tax, is not indexed and threatens every year to apply to millions of affluent folks in high-tax states—Massachusetts, Connecticut, New York, New Jersey, Maryland, California—who also tend to be Democratic voters. These states have 12 Democratic senators and 88 Democratic congressmen. An annual AMT patch is a political must for Democrats, both to propitiate these affluent voters and to reward public-sector unions, which might face downward pressure on spending and taxes if many voters could no longer deduct state and local taxes on their federal income taxes (as is the case for those hit by the AMT). By putting the AMT patch into the stimulus package, Democrats have avoided having to pay for it under the "paygo" rules, which has been a big problem for them every year.
As Edsall points out, this means that the Democrats have tilted the stimulus package toward aiding the affluent rather than those at the lower end of the income spectrum.
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Tags: alternative minimum tax | economic stimulus
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Reader Comments
AMT
Define rich.
I had to pay an average of $2000 extra per year for the last 6 years because of the amt. We do well (low 6 figures) but by no means should be lumped into the 'millionaires'.
AMT was developed in '69 to hit the people who paid no tax. Since then, it has not been adjusted for inflation.
AMT
More and more middle-class people are being hit with AMT. I'm a single father with two kids in college, and I live in the high-cost, high-tax state of California (whose taxes have just been raised again in the just-passed budget for 2009). I am by no means "rich." Now, I believe in a progressive tax rate, and I don't mind being in a higher tax bracket, as long as there is a level playing field. AMT should be eliminated, or else rewritten so that it only applies to the truly rich rather than the middle class (by today's standards, not 1969's) and made adjustable for inflation.
President Obama pledged to do more to help the middle class. He should be leading the charge to permanently fix the AMT or repeal it altogether.
AMT
Fixing the AMT mess does not favor the rich, rather it favors the middle-class who get hit with a tax meant for the wealthy.
This is not a Democrat or Republican issue beyond the fact that neither party has the courage to fix it.
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