Once again, the editors at Opinion Journal are spinning a crisis to pretend that Republicans haven’t been complicit.
In reality, the AMT is one more liberal monster that was created in the name of soaking the rich but has now come back to swallow the middle class. Democrats created the AMT in 1969, amid a political frenzy to capture a mere 21 millionaires who had paid nothing. And the politician most responsible for the AMT’s relentless expansion in recent years is none other than William Jefferson Clinton.
Remember the 1993 tax hike that was supposed to fall only on the rich? In addition to raising gas taxes and Medicare payroll taxes and income tax rates, the Democratic Congress that year also raised the AMT: from a 24% flat rate to a dual tax rate of 26% on AMT income up to $175,000 and 28% on AMT income above that amount.
It’s true that the 1993 bill slightly increased the AMT’s family income exemption, but Democrats refused to index those exemptions for inflation. So the combination of the higher rates and the failure to index for inflation has caught more and more middle-class taxpayers in the AMT’s maw. From 1992 to 2002, this Clinton stealth tax hike increased sixfold the number of filers paying the AMT, to nearly two million from 300,000.
I don’t seek to absolve the Democrats of any guilt, for they surely must share. Still, I have to come back to the reality that the allegedly fiscally conservative Republicans had six years of complete control over the two branches of government necessary to implement reform on these issues. They did nothing. When the weeds got thick, the party punted in favor of attacking gays and Janet Jackson’s breast.
That’s still the proper analysis. Politicians, no matter what letter follows their names, don’t care about leading, which is what solving this before it became a problem required. None of the blame matters. It would be just as easy for the Journal’s editors to start here rather than end up here:
All of which means that if Democrats really want to spare Joe Lunchbucket from the AMT, the cleanest solution is to repeal the Clinton AMT rate hikes. The nearby chart, prepared by the American Shareholders Association based on Joint Tax data, compares the number of filers who will be hit by the AMT under current law and what would happen if the AMT rate was moved back to the pre-Clinton 24% and the exemption was indexed for inflation at the 2005 level of $40,250 ($58,000 for a joint return). Going back to the pre-Clinton rates would leave only about 2.6 million tax filers subject to an AMT penalty next year instead of 23 million under current law.
The estimated “cost” of this fix to the Treasury over 10 years would be some $632 billion, which is money Democrats in Congress would prefer to spend. But as Senator Grassley notes: “This tax was never meant to tax the middle class, so why should we count it as a revenue loss when we make sure they don’t have to pay it?”
The AMT is a travesty, which is where I’d take the discussion. It should go. (I’d end with sweeping simplification to a flat tax.) But aside from including Clinton in that paragraph for historical fact and reference, there is no reason to sling blame. The debate isn’t lifted. Let’s try solutions and how to get them implemented so that we can begin the return to fiscal restraint and limited government.
P.S. I’m going to assume that the excerpt I quoted from myself will stand in as sufficient commentary to mock the nonsense that Democrats, and not politicians in general, would prefer to spend that estimated $632 billion.