(1) Credit
Reuters for identifying this gambit for what it is -- an unserious electoral ploy. As the story notes, a new AMT levied on the super rich and successful small businesses (many of which file as individuals) will not raise much money in revenues. You would think that raising substantial revenues
should be the ostensible goal of deficit reduction programs. Remember, even if the federal government taxed every single family earning over $100,000 this year at
one hundred percent -- total confiscation -- the resulting revenue
would not come close to paying down
this year's deficit. Imposing an additional parallel tax system on far fewer individuals and businesses will reap fractional revenue at best. It would also be perceived by many as another broadside against America's investors and job creators. We've heard
over and over that $2 Trillion in capital is currently sitting on the sidelines due to paralyzing economic uncertainty and pessimism about the US economy's prospects for growth. Spasms of class warfare will not encourage investors to risk their capital, nor will they spur small businesses to expand. Obama's populist adventure may temporarily satisfy some people's class envy, but it won't create jobs. It won't jump-start America's economic engine. And it won't bring in much revenue to pay off the debt -- even if that was what supposedly deficit-reducing revenues actually did,
which they don't. Then again, this president subordinates the priorities of revenue generation and fiscal soundness to his overarching goal of redistributive "fairness."
(2) The White House Communications Director likens the "Buffett Tax" to the Alternative Minimum Tax (AMT). What was the AMT again, and why is it such a headache today? Economist Veronique de Rugy
reminds us:
Congress created the AMT in 1969
to prevent 155 wealthy taxpayers from using deductions and credits to avoid paying any federal income taxes. Here’s how it works. Taxpayers subject to the AMT must calculate their tax liability twice: once under regular income tax rules and again under AMT rules. If liability under the AMT proves higher, taxpayers pay the difference as an add-on to the regular tax. The difference paid is their AMT.
When the regular income tax was indexed for inflation in 1981, however,
Congress failed to index the AMT. So the AMT’s reach has expanded over time to hit middle-income people it was never intended to tax. As a result, the AMT affects a growing share of the population. And it could get worse.
The piece goes on to demonstrate that without Congress' annual "patches" to paper-over the mistake made in 1981, the AMT -- which was originally designed as a
let's-make-the-super-rich-pay-their-fair-share measure -- would effect tens of millions of taxpayers today. Once taxpayers are subject to the AMT (the non-inflation adjusted trigger threshold is $175,000 for individuals and married couples), many end up facing an increased tax burden and are denied popular tax deductions. The $175K sum may have been huge bucks in 1969 or 1981, but it's not a boatload of cash anymore, especially in
high-cost locales like New York, Massachusetts, and California. So the AMT was set up in such a way that, absent the cumbersome yearly corrections, it would punish millions of middle class families -- households it was never intended to affect. In other words, the AMT debacle is an example of soak-the-rich, "fairness"-seeking tax policy run amok. It's a monument to federal incompetence, unintended consequences, and tax "bracket-creep." And now the White House is citing it as a basis for Obama's
new soak-the-rich "fairness"-seeking tax policy.
Terrific.
http://townhall.com/tipsheet/guybens...ffett_tax_sham