Thursday, December 13, 2007

Democrat's Alternative Minimum Tax Fiasco

The editorial staff of the San Francisco Chronicle has never been accused of rational analysis of an issue, and their position on the Alternative Minimum Tax (AMT) perpetuates their irrationality.

They begin their analysis by stating that the AMT was an all-time winner of the Good Idea Gone Bad award. That leaves me to wonder, why was it a good idea in the first place?

Because Democrats created it, and now don't know what to do to prevent current and future catastrophes?

What was the purpose of the AMT?

The answer, to prevent people from dodging taxes by adhering to tax law and taking legal and permitted deductions (including long-term capital gains, accelerated depreciation, certain medical expenses, percentage depletion, certain tax-exempt income, certain credits, personal exemptions, and the standard deduction).

The tax laws, of course, were crafted by Congress to encourage and reward taxpayers to do certain things, but Congress didn’t intend that people actually do those things scrupulously and not pay any income tax at all. That offended Congress’ sense of fair play, thinking that in such circumstances that taxpayers should do their civic duty and overpay their taxes.

Since no taxpayers with significant incomes could be found that were so stupid that they paid taxes they didn’t have to, a Democrat Congress and President decided to fix the problem and created the AMT in 1969.

As with the rest of LBJ’s programs, the AMT rapidly became what it wasn’t intended to be, a sloppily devised program that fed on gains from inflation, and increasingly preyed upon taxpayers in high income, high tax urban areas, predominantly Democrats.

Unfortunately for Democrats, the AMT was so successful at taxing inflationary gains that their plans for spending increases are highly dependent upon the increased tax revenues the AMT unchanged would generate.

At this point the Democrats, and their mouthpieces like the San Francisco Chronicle, protest that the tax revenues lost by eliminating or scaling back the AMT must be replaced by increasing some other tax.

What is the logic in that?

If this misbegotten legislation had never been passed there would not be a huge pot sitting at the end of the IRS rainbow causing spendaholic congress-people to desperately search for replacement revenue.

Even Democrats admit that the taxes generated by the AMT are by mistake, that there never was intent to penalize middle-class taxpayers for the sin of scrupulous compliance with tax law by the wealthy. In fact, the original intent was to nail only 155 taxpayers, but it immediately went totally out of control.

And these are the folks you want running health care?

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