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House Bill To Fix Minimum Tax Mess Is Doomed

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The Tampa Tribune

Published: November 14, 2007

You may not have heard of the AMT - many haven't - but forget all those horrors that recently haunted Halloween movie and TV screens. AMT is the real thing - a monster that's about to eat you up. Well, a lot of you anyway.

The Alternative Minimum Tax is a great idea gone woefully wrong from neglect. It was enacted in 1969 to ensure the hyper rich, no matter how many lawyers and accountants they laid on, would pay at least something into the common coffers. Here, at last, was a tax that would still be there after every deduction and asset razzle-dazzle had been figured in.

Trouble is, creeping inflation has been slowly lowering the effective threshold. The AMT already snags four million upper-echelon taxpayers who were never intended for its grasp and 23 million upper-middle-class earners could fall prey next year if Congress doesn't intervene.

The U.S. House of Representatives has now voted to set the boundary aright - and, good news, to do still more and better. Alas, its fine work is almost surely doomed.

Not only did the House properly shield the higher middle incomes, it also fixed glitches in the $1,000 annual Child Tax Credit, so that some 2.9 more children would be qualified - a help to low- and moderate-income families under no menace from the AMT.

And what's more, the House bill pays for these adjustments - the first time in seven years that tax breaks wouldn't add to the budget deficit. It does that by ending the gimmick that taxes the carried-interest income of private equity and hedge fund managers as if it were capital gains - that is, at 15 percent rather than the 35 percent levied on other high incomes.

(This is the indulgence whose unfairness Really Rich Guy Warren Buffett has deplored for taxing much of his income and that of his peers at a way lower rate than the incomes of others who are far less well off.)

So the House bill fixes in one whoosh the AMT trap, holds harmless a federal budget burdened by Bush's tax largess to the rich, gives a break to middle and lower earners and rights the tax system's inequities at least a little.

Didn't you just know it was too good to be true?

The bill is the product of House Democrats, but Democrats in the Senate are jittery. Big-money lobbyists have concentrated their importunings and have dangled their campaign-fund bling most energetically there, and a number of Senate Democrats are hopping around on cold feet.

Even if the Senate's Democrats do manage to do what is manifestly right and act on what are supposed to be their principles - you know, fairness and all that - the gesture will be futile.

The White House has, naturally, declared that if the House bill is enacted, President Bush, champion of the untrodden, will veto it. It just wouldn't do to have the undertaxed pay to square matters with the overtaxed.

When the dust settles, we'll be back where we've been for years, with another one-year patch to ward of the worst of the AMT's unintended marauding. But at least for once, a number of the Democrats will have stirred a worthy dust-up.

Tom Teepen is a columnist for Cox Newspapers.

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