Democrats lose nerve on fixing hated tax
A Times EditorialPublished December 9, 2007
Do you want fiscal responsibility from Congress or a tax cut? You could have had both as lawmakers set about taming the out-of-control alternative minimum tax. But Senate Republicans said they didn't want to pay for a real fix, and Democrats caved quicker than a Florida sinkhole.
House Democrats are still talking tough about offsetting the cost of an AMT fix by rasing the tax rate on hedge fund managers, who currently pay at a lower rate than their chauffeurs. Don't bet on it. Although Republicans lost control of both chambers of Congress, they're still able to stare down Democrats on important issues such as taxes, war funding and global warming.
Even a temporary, irresponsible fix for the AMT will come as welcome relief for the 25-million families who would otherwise be pinched by an average increase of $2,000 on their 2007 tax bill. Everyone agrees that the AMT was never meant to penalize working families, but the decades-old law written to nab a few wealthy individuals wasn't pegged to inflation. So without a fix, it will begin to reach the middle class, especially those who use deductions for dependent children and state taxes.
The one-year AMT patch that passed the Senate, however, will cost $50-billion. Without raising other taxes or cutting spending by an equal amount, Congress will just add that amount to the budget deficit. Democrats had prided themselves on sticking to a "pay as you go" policy, but when Republicans forced a vote on the AMT patch without any tax or spending offsets, only five Democrats opposed the bill.
Sounding particularly pathetic was Senate Majority Leader Harry Reid, D-Nev., who said: "This is a $50-billion patch. Shouldn't it be paid for? The answer is obviously 'yes.'"
So why did Reid vote for the Republican fix that left out a tax increase on hedge fund operators? Political cowardice, apparently.
So now the House will decide which is more irresponsible - growing the AMT or the budget deficit. We would have preferred a responsible fix, in which Congress ended the AMT altogether by shifting more of the tax burden to where it belongs.
As long as Republicans mindlessly repeat their mantra of tax cuts at any cost, and Democrats can't find their backbones, it's not likely to happen.