The Washington Post is reporting about how the Democrats are eyeing more ways to take money from the rich. But taking from the rich is OK because it benefits the poor and middle-class, don’t you know?
House Democrats looking to spare millions of middle-class families from the expensive bite of the alternative minimum tax are considering adding a surcharge of 4 percent or more to the tax bills of the nation’s wealthiest households.
Under one version of the proposal, about 1 million families would be hit with a 4.3 percent surtax on income over $500,000, which would raise enough money to permit Congress to abolish the alternative minimum tax for millions of households earning less than $250,000 a year, according to Democratic aides and others familiar with the plan.
Rep. Richard E. Neal (D-Mass.), chairman of the House subcommittee with primary responsibility for the AMT, said that option would also lower AMT bills for families making $250,000 to $500,000. And it would pay for reductions under the regular income tax for married couples, children and the working poor.
Notice the spin on the article? Taxing the rich an extra 4%+ would pay for tax reductions for others. The government can’t reduce some people’s taxes without socking it to someone else because the government certainly can’t do without. It needs every penny, and then some. Government looks at tax revenues as its right. If House Democrats really wanted to “spare millions of middle-class families from the expensive bite of the alternative minimum tax”, they could do so by a simple law getting rid of it.
And just what is the alternate minimum tax? The article explains how it came into being: government arrogance.
The alternative minimum tax is a parallel tax structure created in 1969 to nab 155 super-rich tax filers who had been able to wipe out their tax bills using loopholes and deductions. Under AMT rules, taxpayers must calculate their taxes twice — once using normal deductions and tax rates and once using special AMT deductions and rates — and pay the higher figure.
Congress wrote those tax laws, with all their loopholes and deductions. And when some very rich people were playing by the very rules Congress had written and were paying little or no taxes, Congress reacted by closing the loopholes and deductions. Hah! Just kidding. No, Congress decided to sock it to them by coming up with the AMT. If you succeed in winning at their game, they do a Lucy Van Pelt and pull the football away. You will pay taxes, even if it means Congress has to write laws that apply only to the richest 155 people in America. But history shows that when you target the rich, you end up causing major collateral damage. The 16th Amendment and the income tax were trumpeted as a tax on the rich, and not much of a tax anyway. No need to worry, America, Congress was only going to tax the rich people. In 1917, people making more than $3,000 were taxed 1% of their income, and earning more than $500,000 got you taxed at 7%. That’s equivalent to $50,000 and $8,000,000 in today’s money. But just as the income tax expanded to hit more than just “the rich,” so did the AMT.
Because the AMT was not indexed for inflation, its reach has expanded annually, delivering a significant tax increase this spring to an estimated 4 million households. The AMT would have spread even more rapidly after President Bush’s tax cuts reduced taxpayers’ normal bills, but Congress enacted yearly “patches” to restrain its growth. The most recent patch expired in December, and unless Congress acts, the tax is projected to strike more than 23 million households next spring, many of them earning as little as $50,000 a year.
The problem comes from using class envy to tax the rich. As the phrase goes, “He who robs Peter to pay Paul will always have the support of Paul.” Congress has been successful with the income tax in general and the AMT in specific in targeting the rich Peters, but the problem is that Congress keeps expanding the ring of targets. Pauls who once happily smirked as Congress vacuumed Peter’s wallet are now finding that they have turned into Peters themselves. And now they hear the D.C. vacuums moving towards their own wallets. The AMT started out affecting only the very rich, but now making as little as $50,000 can classify you as “rich” in the eyes of the AMT.
And what is Congress doing about this? Well, predictably, they want to talk about it first:
In the House, some Democrats argue that more time is needed to explain the issue to the public. The vast majority of households have yet to pay the AMT and may not fully appreciate the value of eliminating the tax, while the wealthy are sure to feel the bite of a new surtax.
“I don’t think there’s enough of an understanding right now that you’ve got this tidal tax wave about to hit everybody,” said Rep. Chris Van Hollen (D-Md.), a Ways and Means Committee member who is also chairman of the Democratic Congressional Campaign Committee. “From a political perspective, we need to lay the groundwork.”
Congress needs to talk about the AMT because Americans are too dumb to “fully appreciate the value of eliminating the tax” unless Congress lays the groundwork first. I hope they use really small words to keep it simple for us dunderheads and short enough to fit into their sound bites between commercials. Heaven knows we don’t want to miss this episode of “House.”
So how do you like the idea of an extra surcharge of 4% on single people making more than $100,000 or families making $200,000? Isn’t it time that the rich pay their fair share? I guess it depends on your definition of “fair.” Back in 2001, “fair” meant that the richest 5% of Americans paid 53.3% of all the income taxes. Yeah, that sounds fair. And it sounds familiar, too.
Congress could spend months talking with Americans, or they could just get rid of the AMT. It all boils down to whether Congress believes your money belongs to you, or to them.
Ask not for whom the tax man comes, he comes for thee.