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| The Mother of all Tax Hikes |
November 06, 2007 |
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Dear Friends,
We knew it was coming. The Democratic budget this year paved the way for it. Charlie Rangel, the Democrat chairman of the House Ways and Means Committee unveiled it two weeks ago. Called “the Mother of all Tax Hikes”, it’s the second largest tax increase in American history.
The first piece of these tax hikes is coming up for a vote in Congress this week. The Democrats are rolling this tax hike in with a bill to provide tax relief on the Alternative Minimum Tax. Their bill is just the beginning.
Designed in 1969 to make sure very high income Americans pay taxes, the AMT is not adjusted for inflation. When Republicans were in the majority, Congress passed legislation repealing the AMT. President Clinton vetoed it. Every year since then, we "patched" the AMT problem, never waiting later than June to do so. It's November and the AMT still is not fixed for this tax year.
On Oct. 23, Treasury Secretary Hank Paulson said that continued inaction on the AMT could lead to 50 million taxpayers having their tax refunds delayed by up to two and a half months. That would be, in effect, a $75 billion interest-free loan from the American people to their government.
Charlie Rangel's tax bill claims to fix the AMT -- while raising all sorts of other taxes that make fixing the AMT pretty hollow.
We should get rid of the AMT tax without raising taxes elsewhere.
Overall, the Democrats’ budget assumes all of the tax relief we passed in 2001 and 2003 will be allowed to expire. That means the child tax credit will be cut in half, personal income tax rates will go back up, the 10 percent tax bracket will be gone, the marriage penalty will return, and the death tax will come back to life.
In addition to all that, Democrats want to add a 4% “surtax” on Americans earning more than $150,000 a year ($200,000 for couples). So, under the Democrats’ plan, over the next few years, the top individual income tax rate in the United States will go from 35% to 44%. Starting in 2011, only five other developed countries in the world would have higher top marginal tax rates than the United States.
And, because the surtax kicks in at $150,000 for individuals and $200,000 for couples, the bill creates a huge marriage penalty.
The total impact of allowing the 2001 and 2003 tax relief to expire, plus adding in all the new taxes in Charlie Rangel's bill, will amount to new taxes of $3.5 trillion over ten years.
That's right: a $3,500,000,000,000 tax increase on the American people.
The AMT patch has been delayed so long that we face a potential fiasco on filing day next April. And now the Democratic leadership wants to wrap the AMT fix inside a huge new tax increase that will not be able to pass the Senate or be signed by the President.
The way to avoid this predictable train wreck is to immediately pass an AMT patch without other tax increases. But Mr. Rangel and Speaker Pelosi are unlikely to do that. Why? Because they support the mother of all tax hikes and this is just the beginning.
Wish you were here,
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