Tax Hikes in Tax Reform Clothing
Right now, a tax plan is being floated around the halls of Congress as a middle-class tax cut. Unfortunately, "Tax Reduction and Reform Act" does little to earn its title.
At the heart of this matter is a provision attempting to address the Alternative Minimum Tax (AMT). I've previously shared my thoughts with you on the AMT, or the Alternative Maximum Tax as I like to call it.
Congress first imposed the AMT in 1969 to ensure 155 wealthy taxpayers, who paid no income taxes, would pay something. But since it was not indexed for inflation, the AMT now hits millions of taxpayers, and if left alone, will shortly hit tens of millions more.
Congress has sought ways to prevent the AMT from growing. In recent years, to prevent the AMT from reaching even more people, Congress has enacted several short-term "patches," increasing the exemption amounts so middle-income taxpayers would be shielded from the AMT.
Last year, as a result of the patch, only four million people paid the AMT, all high-income, high deduction earners. The Treasury Department estimates that without enactment of a fix, 25 million could face the tax on their 2007 tax returns, and those taxpayers would face an average tax increase of $2,000.
In Nebraska, if the AMT patch is not extended 153,928 people will be affected - 47,899 of them in the Third District alone. Clearly, this is an issue requiring real attention, not just gimmicks.
Yet the Tax Reduction and Reform Act goes well beyond the AMT - imposing surtaxes on middle-income taxpayers, broadening the tax base, and imposing new income taxes.
This week, the Joint Committee on Taxation (Congress' nonpartisan tax analysis office) issued a report comparing the majority's tax plan to what people would pay in future years if the 2006 tax law were extended (including an AMT patch).
The report shows that by 2011, 94 million families earning between $20,000 and $200,000 will see a tax hike, while only 800,000 families will see a tax reduction. These are the same families already feeling the crunch of increasing prices of fuel, health care, and the cost of living. The last thing we need is to burden them further with new taxes.
The numerous tax increases contained in the bill have also been called a punishing blow to small businesses. But don't just take my word for it.
"In almost every respect, the bulk of revenue raisers will extract precious operating capital from small firms. I don't know if this was Chairman (Charlie) Rangel's purpose, but it will most certainly be the consequence of his proposed legislation," said Small Business and Entrepreneurship Council President and CEO Karen Kerrigan. "With all due respect, the bill takes aim at the entrepreneurial sector, and will vastly hurt their job-creating, innovative and competitive capacity in the global economy."
Nebraska has always been the land of lower taxes and less government. Families are working hard to make ends meet at home For Congress to demand they pay higher taxes flies in the face of Nebraska commonsense.