ReZoom

In the latest Wall Street Journal/NBC poll, just 19% of respondents said they approved of the job Congress is doing, while 68% disapproved. That is barely half a good as George Bush’s most recent grade. Their collective work on the Alternative Minimum Tax issue is one of the reasons why. It is a great example of the partisan gridlock that plagues us.

For nearly forty years, the holiday season on Capitol Hill has meant lighting the tree on the White House lawn and putting a “patch” on the Alternative Minimum Tax provision of the Tax Code. They have patched and patched until now it’s really broken. The provision that was passed by Congress in 1969, after reports that 155 people earning more than $200,000 a year, had paid no federal income tax in 1967. Unfortunately, they threshold for the AMT was not indexed to account for inflation. Now, for 2007, some 3-4million tax filers will qualify, and the real news is that, without a “fix”, the expiration of certain exclusions will mean that over 20 million of us will be sucked into the AMT black hole and pay substantially more tax. Estimates of just how much more average in the $2,000 range. Merry Christmas.

The truth is this tax provision is equally despised by both Democrats and Republicans. So why not kill it? How could Congress face it for forty straight years and never find a solution? Why in 2007, is the debate raging into December, making it likely that the IRS will not be able to create forms and computer programs to support correct filing in time to prevent delays in sending out refunds? Well, it not because there are differing points of view….that is the nature of politics. The Democrats want to keep the whole bill revenue neutral: patching AMT will cost revenue, and Democrats want to raise taxes somewhere else to make up for it. Republicans have flatly refused. Not only will the GOP not support tax increases under any circumstances these days, but the AMT debate has made it clear that they won't even support revenue neutral tax legislation any more. It's a tax cut or nothing.

No, the problem is not their particular position; it’s their failure to legislate in spite of their positions. A Republican filibuster is not the answer at this time. On this issue, the Democrats have the winning argument. The cost of eliminating the AMT is some $50 billion in revenue. That is too much impact on the budget to ignore. The tax offsets chosen by the Democrats for this legislation won't affect ordinary taxpayers. Most of those affected will be high-income individuals that pay unusually low rates of tax on their income. In other words, these offsets affect precisely the same kind of taxpayers that were the original targets of the AMT. If Republicans have their way, the offsets will be eliminated and the revenue loss will add to a budget deficit that we or our children will have to bear in years to come.

When it comes to taxes, I want to pay as little as possible, but what is needed at this point in time is a working compromise.

Here’s a detailed summary of the AMT debate

See if you fall under the AMT provision?