- After Members return from the Memorial Day District Work Period, Democrats are expected to introduce a plan to modify the AMT. This proposal will have some superficial appeal, but Republican Members should just say “no” to the Democrats’ scheme.
- The Democrats plan to offer phantom tax “cuts” in exchange for very real tax increases. Those tax increases will be a crushing burden for some small businesses, farmers, and the economy as a whole.
- The AMT was created in the 1960s by Democrats outraged by reports that a small number of wealthy Americans were using tax deductions to avoid paying any tax at all. The current problems with the system date to 1993, when a Democratic President and a Democratic Congress jacked up the AMT rates and failed to index them for inflation. Over the past two decades, a form of “bracket creep” has led to some middle class families (particularly in high-tax, predominantly Democratic areas) being subject to the AMT. Republicans voted to abolish the AMT in 1999, but President Clinton vetoed the bill.
- Every year since then, Republicans have led annual efforts to protect the middle class from the AMT using a series of one-year patches. Most of the people Democrats claim will benefit from their AMT scheme have NEVER actually paid the AMT. Most have no idea that – under current tax law – they could do so in the future. Democrats misleadingly claim that the 2001 and 2003 tax cuts led to more people paying the AMT. That is simply false. Between the patches and the tax cuts, fewer people are paying the AMT today than would have under pre-2001 tax laws.
- According to the press accounts, Democrats plan to provide AMT tax relief to middle-income taxpayers by increasing the tax burden on higher-earners. Specifically, they are considering an AMT exemption for families earning up to $250,000, as well as certain “sweeteners” like extending Republican tax cuts such as the 10 percent bracket, the $1,000 child tax credit, or marriage penalty relief. The top marginal tax rate in the U.S. today is 35 percent. Under the Democrats’ budget, it is already scheduled to climb back to 39.6 percent after 2010.
- There are many ways the Democrats can hide the magnitude of the tax increase, but paying for their rumored proposal solely by raising the top marginal rate would put our top bracket on par with France’s 48.09 percent.
- That rate would apply to hundreds of thousands of taxpayers, including tens of thousands of small business owners and farmers.
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