Wednesday, November 15, 2006

Chairman Rangel and the AMT

Most of my co-workers like to listen to conservative talk radio hosts like Rush Limbaugh and Hannity, and I'll admit I do as well. I sometimes agree with Hannity, but often I find Hannity to be a Kool-Aid drinking blowhard. Yesterday was one of those blowhard days. On the Hannity show Chairman-elect of the House Ways and Means Committee Charles Rangel was being badgered on the issue of whether the Democrat Congress will raise taxes or not, a somewhat ludacris arguement considering the Democrats don't have a large enough majority to overrule inevitable Bush vetoes of any proposed tax hikes while he is in office. However, I must say that I was at least somewhat impressed with a few of Rangel's responses regarding the Alternative minimum tax.

Here is a brief history of the AMT, the Democrat ran 91st Congress enacted the AMT in 1969 following testimony by the Secretary of the Treasury that 155 people with adjusted gross income above $200,000 had paid zero federal income tax on their 1967 tax returns. In inflation-adjusted terms, those 1967 incomes would be roughly $1.17 million in today’s dollars. This tax avoidance by a few high-income taxpayers was widely perceived as unfair. Rather than directly addressing the problem by eliminating the deductions and credits in the tax code that were leading to the tax avoidance, Congress laid an additional layer of complexity over the regular income tax in the form of the AMT.

Congressman Rangel claimed in his interview with Hannity that his main focus as chairman will be "fixing" the AMT. Depending on what he means by "fixing" the AMT, I am rather impressed at his commitment to fix on of the most poorly conceived and uninsightful parts of the tax code. The AMT, because of how poorly crafted the law was, is now growing closer to affecting several million Americans (because of 155 Americans in 1967) whom the 91st Congress never intended to burden with this tax. I look forward to see how the Ways and Means Committee addresses this issue.

I still am concerned as to what portions of current tax law that the Democrat Ways and Means Committee will seek to repeal in order to raise revenue and or make the changes that Rangel claims need to be made. I would solidly argue there are many individual tax cuts that need to be made permanent are the child tax credit, the higher standard deductions, the home mortgage interest deduction, and a large host of individual deductions. The issues that the Ways and Means Committee need to focus on in regards to revenue raising, are giving the IRS the needed funding to increase enforcement, customer service, and collection efforts. I strongly hope that this Congress will focus on fixing issues that need fixing (such as the AMT) and solidifying postive tax law changes that have been made during the current president's administration.

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