Tax on Democrats

Daniel Gross has a strange piece in Slate arguing that the Alternative Minimum Tax is a secret Republican plot to screw over Democrats.

The AMT traces its origins to a minimum tax enacted in 1970 when Americans were scandalized to learn that some 155 high-earning taxpayers owed no income taxes in 1966. The AMT was originally designed so that people who had a lot of income but loads of deductions—through the standard exemption, the ability to write off property taxes and state income taxes—couldn’t reduce their taxable income to next to nothing. Historically, it applied to a tiny minority of taxpayers. But with every passing year, more and more citizens are ushered behind the velvet ropes. This congressional backgrounder suggests that 1.8 million Americans paid it in 2001. Newsweek‘s nearly infallible Allan Sloan wrote earlier this month that “about 2.3 million returns for 2003 got nipped by the AMT.” The numbers are set to rise exponentially in the next several years. A two-income couple in New Jersey—he’s an accountant, she’s a public school teacher—with combined income of $230,000, three kids, and annual property taxes of $15,000, could easily fall into paying the AMT. Even government bureaucrats get nailed.

So, let’s get this straight. A tax initiated by a Democratic Congress (albeit signed by a Republican president) 34 years ago is a secret plot by the Bush Administration to screw over people making $230,000 a year. Who, under pretty much any definition–Democrat or otherwise–are “wealthy.”

While Republicans are patting themselves on the back for reducing marginal taxes, they’ve been oddly silent about how the AMT excludes millions of Americans—and relatively well-off ones at that—from the benefits of the tax cuts. Here’s a theory: Could it be because those most likely to fall prey to the AMT live in states that Bush-Cheney ’04 has already written off?

Now, could you imagine Bush proposing that we cut this tax that’s unfairly making people who make $200,000 to $500,000 a year, who would otherwise pay next to no federal taxes because they’re getting big deductions on their million dollar homes, actually pay some tax? Tax cuts for the rich! Ordinary Americans don’t make that kind of money! Republicans don’t care about the little guy!

Now, I’m not arguing that this tax is a good idea. Indeed, it strikes me as a strange idea–I’ve said so two months ago. But let’s quit pretending that everything that has a disproportionate effect was intended malevolently. Indeed, the same argument that’s being made against the AMT–that it hurts people living in places with high property values–could be said of the graduated income tax–or, indeed, the income tax, period–since incomes tend to be artificially higher in places where housing prices are higher.

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FILED UNDER: Economics and Business
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Anonymous says:

    > people making $230,000 a year. Who, under
    > pretty much any definition—Democrat or otherwise
    > —are “wealthy.”

    I can’t figure this out. The unadjusted gross of my household will be just over $200K this year, both my wife and I being middle managers making right at $100K in California. We have no debt, but both drive 5 year old cars that each cost leass than $30K at the time (nice, but not luxury), are limited to one vacation a year and by no means enjoy an “upper class” lifestyle. Our home is nothing extravagant, and while we did some improvements to it, no one would mistake it for a mansion at less than 2000 sq. feet.

    Somehow, I have climbed up from nothing to “rich”, but I don’t have any, nor can I afford, any of the things the rich are supposed to enjoy. After subtracting taxes (fed, state, property), mortgage, retirement savings, non-retirement savints, groceries, childcare and all the other things just to run my family, I have absolutely nothing left over.

  2. Mr Mouse says:

    Would it mean that there would be no more free government cheese?

  3. Tiger says:

    After subtracting taxes (fed, state, property), mortgage, retirement savings, non-retirement savin[g]s, groceries, childcare and all the other things just to run my family, I have absolutely nothing left over.

    Really? What about all the money you were able to sock away in that savings account? Is it nothing?

  4. Attila Girl says:

    It’s so difficult to compare these things, especially in places like LA and New York where one really has to be “rich” from the rest of the country’s POV just to be able to afford the housing costs (a teensy little house here is $500,000; rents start at $1000 per bedroom in the nicer towns). And, of course, lots of other things are more costly here as well.

    It’s also really hard to compare costs in two-income households vs. one-income households, since very often that second income is eaten right up in things like commuting, wardrobe needs, childcare, convenience foods and restaurant meals, a cleaning lady, and all the other things that, for most people, make the two-income lifestyle possible.