If Democrats are serious about rolling back the alternative minimum tax, then they should be happy to have gotten a little more fodder last week to use in whatever PR campaign accompanies the unveiling of their plan.The White House released copies of the tax returns for both the Bushes and the Cheneys last Friday, and both families somehow found their way to avoiding the AMT.
President Bush and the first lady paid $186,378 in federal taxes on their adjusted gross income of $765,801, reporting $42,000 in taxable capital gains along the way (the first of his presidency), and donated about $78,000 last year to churches and charitable organizations. Meanwhile, the return for Vice President Dick Cheney and his wife, Lynne, shows that they owed federal taxes of $413,326 on taxable income of $1.6 million. The Cheneys donated more than $100,000 to charity in 2006, which the White House noted brought the couple’s total charitable contributions since 2000 to just over $7.8 million.
A major reason the first families were able to skirt the AMT is that they both claim residents in two of the six states that don't impose the high state and local taxes that frequently trigger the tax -- the Bushes claim residence in Texas, while the Cheneys claim residence in Wyoming.
It serves as just one more example of how the AMT is no longer fulfilling its original purpose, which was to ensure that the nation’s wealthiest couldn’t skirt paying their share of taxes on the income they earned. Most experts point to two reasons for the shift of the AMT burden onto middle-class America -- first, the cuts made under the regular income tax in recent years have narrowed the differences between regular and AMT tax liabilities for middle- and higher-income-earning individuals. Second, regular income tax brackets are indexed for inflation, but the AMT thresholds are not. Over time, that has reduced the differences between regular income tax liabilities and AMT liabilities for lower income levels.
Politicians on both sides of the congressional aisle, plus President Bush, have said that something needs to be done about the tax. But both sides continue to choose pass a series of one-year patches to prevent the AMT’s expansion -- declining to address the $1 trillion hole in the federal budget that eliminating the AMT entirely would leave over the next decade.
Earlier this month, word spread that House Democrats are planning to roll out a permanent overhaul of the AMT, so that anyone who earns less than about $200,000 a year would be excluded from paying the tax -- a shield to about 97 percent of taxpayers.
But much like tax reform, I’ll believe it when I see it. With the nation’s wealthiest doubling as the ones making the laws, or providing financial backing to the pols making those laws, it seems too often that politicians chose to hold their punches when it comes to dealing with the country’s tax problems -- oftentimes choosing to pay lip service to the problem instead of effectively tackling it.
The Democrats are expected to release their plan for the AMT in the next six weeks. I hope when it comes time to sell their plan, they take off their gloves and point to themselves, as well as the Republicans across the aisle, as part of selling their bill and explainning why permanent change to the AMT formula is long overdue.
