Monday, April 23, 2007

Democrats Taking The Tax Issue Back From Republicans

What a great idea:

House Democrats, aiming to seize taxes from Republicans as a political issue, have come up with a plan to shift the burden of the hated alternative minimum tax onto the shoulders of the nation's richest households.

The proposal, still in its preliminary stages, would attempt to restore the original purpose of the parallel tax structure, which was created in 1969 to nab 155 super-rich tax filers who were using loopholes and deductions to wipe out their tax bills.

Because it was not indexed for inflation, the AMT delivered a significant tax increase to an estimated 3 percent of households this year. Unless the law is changed, it is projected to strike nearly 20 percent of taxpayers when they file returns next spring, many earning as little as $50,000 a year.

House Democrats are trying to craft legislation that would spare those households while providing relief to many current AMT payers. Under a proposal presented last week to Democrats on the tax-writing Ways and Means Committee, families making less than $250,000 a year -- about 98 percent of taxpayers -- would be exempt from the tax. Those earning between $250,000 and about $500,000 would see lower AMT bills, according to Democratic sources who spoke on condition of anonymity because the plan is not final.

To make up the lost revenue, families earning more than $500,000 a year would take a much harder hit from the AMT, as well as other adjustments to the tax code, the sources said. Democrats haven't finalized that part of the proposal. But an analysis by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution, suggests that the nation's wealthiest families -- less than 1 percent of all taxpayers -- would have to pay 5 to 13 percent more to offset the revenue lost by exempting the middle class from the AMT, with families who make more than $1 million paying an extra $52,000, on average, each year.

Whattya know, tax relief for 98% of the country while 2% (the richest 2%) get a tax hike and return to paying the kinds of taxes they used to pay.

Sounds good to me.

I'm sure many Republicans and the usual FAUX News channel suspects will call these proposals "class warfare" and Senate Republicans will try and kill them with parliamentary maneuvers.

Oh, wait, they already did call the proposals "class warfare":

Republicans, who also advocate repealing or substantially rewriting the AMT, dismiss Democratic ideas as "class warfare." Wisconsin Rep. Paul D. Ryan, senior Republican on the House Budget Committee, said raising taxes for the wealthiest Americans would punish small-business owners. He dubbed the idea a "job killer."

Republicans also question the potency of the tax as a political issue, given that most of the people Democrats hope to rescue have yet to feel its bite.

Louisiana Rep. Jim McCrery, the senior Republican on the House Ways and Means Committee, said the Democratic proposal would avoid a tax increase for some, but those people "won't see any more money in their pockets." Meanwhile, "the people who get the tax increase certainly would feel that," McCrery said. "So their proposal could be characterized as a tax increase, and a big one."

So let's see if I have this straight: Democrats plan to give tax relief to 98% of the country and tax increases for the wealthiest 2% and Republicans plan on framing the issue as "class warfare" and "the biggest tax increase in history." It's also a "job killer."

Sure, it's class warfare- it's fighting for the middle and working classes, the people Republicans long ago abandoned with their policies of lowering tax rates for rich people and spreading the tax burden to the middle class, offering as much government welfare as possible for corporations (see Halliburton, Big Pharma, Big Oil, Student Loan Lenders, etc.), enabling many of those same corporations to outsource as many American jobs as possible overseas (the real "job killers"), and passing laws like the Bankruptcy Reform Act that were aimed at maximizing profits for the credit card and banking industries (cuz' Citicorp isn't making enough money, you know...I guess that's why they're outsourcing 22,000 American jobs overseas...)

I dunno if the Republican Party realizes this, but after 6+ years of Bush's rule, many Americans no longer see them as the tax-cutting, fiscally prudent party. They see them as the wasteful (see Iraq costs, see Katrina costs) inept (see Iraq, see Katrina) and corrupt (see Bob Ney, see Jack Abramoff, see Tom Delay, see Scooter Libby, see John Doolittle, see Rick Renzi...)

Maybe fighting to keep taxes low for the top 2% will be a great electoral strategy for Repubs but I'm not sure it will be as easy for them to frame that way as they think.

Beware of stealth taxes, too. I heard discussions on NPR of two plans to use market forces to reduce carbon emissions, cap-and-trade and a direct carbon tax. Cap-and-trade sounds more complicated, but the burden is placed primarily on CO2 emitters, and requires almost no federal supervision. It gives state utility boards a line item on power companies' rate increase requests that they can deny rather easily - cap-and-trade losses. It also gives CO2 emitters a MAJOR incentive to clean up as much as possible. A carbon tax sounds simpler, and it would be for power plants and the like, because they could pass their added costs on to the consumer as another line item on the bill, and wouldn't have any particular incentive to reduce emissions. The killer is that the man presenting the carbon tax proposal said it would be made revenue-neutral by giving taxpayers a break on their income tax (he repeatedly said "payroll tax", but that makes no sense without a matching income tax reduction). Since the poor spend a larger percentage of their incomes than the wealthy do on power, gasoline and the like, how could a tax reduction or refund possibly be made neutral for each taxpayer? In short, a carbon tax presents the opportunity to transfer massive amounts of money from the poor to the wealthy.

Watch for those on the energy companies' payroll to favor the carbon tax, then tar and feather them and ride them out of town on a rail.
Interesting how, for the GOP, making the AMT more progressive is 'class-warfare' but allowing it to become increasingly regressive over a period of decades is somehow...not.
kicksiron, here in NY, Mayor Moneybags has decided to add $2.50 a month to every household's utility bill for "Green Energy" (which I think means whatever crony he wants to buy it from) and $8 to drive into Manhattan for cars and $21 for trucks. The truck charge may be particularly onerous, as it will result in higher grocery prices, clothing prices, etc. across the board here in Manhattan. The "experts' say Moneybags' proposals don't have a chance in hell of passing, but Bloomberg often has a way of getting his own way.

kvatch, that's called FOX NEWS Facts!
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