A Stitch in Haste

I have just learned, thanks to the Tax Foundation, that the Congressional District in which I live has the second highest incidence of Alternative Minimum Tax in the nation. (The district containing Westchester County has the number one slot.)

I, who must pay the AMT, should write my member of Congress to complain.

But she's a Democrat, so why bother?

Another New York City "why bother" Democrat is House Way and Means Committee Chairman Charlie Rangel, whose most noteworthy recent headlines up until now were his repeated collectivist calls for conscription. He and his fellow Democrats have a slight conundrum regarding the AMT:

1. They largely represent high-tax states such as New York, New Jersey, Connecticut and California, the taxpayers of which are especially burdened by the AMT, since it does not allow a deduction for state and local taxes the way the regular federal income tax does. So they at least nominally want to do something about it.*

2. However, they have also pledged to adhere to the principle of "pay as you go" (sublimely abbreviated as "PAYGO"). Under PAYGO, the government supposedly does not spend any new money, or enact any new tax cut, without finding a dollar-for-dollar offset somewhere else in the federal budget. Under the simple arithmetic of PAYGO, it is proclaimed, the federal budget deficit can never increase.

PAYGO is of course a complete fraud. It exempts all existing automatic increases in non-discretionary expenditures (e.g., entitlement COLAs) and automatic changes in the tax code (e.g., adjusting tax brackets for inflation). Too little of federal fiscal policy is actually subject to PAYGO for it to be anything more than an empty bromide.

In any case, abolishing the AMT would by some estimates "cost" (i.e., lower tax burdens) by as much as $1 trillion over the next ten years. So, under PAYGO, Congress would have to find $1 trillion in spending cuts or tax increases before it could abolish the AMT.

Yeah right, good luck with that.

So, in the end, expect the AMT crisis to remain on autopilot straight into the looming mountainside, with much hand-wringing -- and no action whatsoever -- by politicians in the meantime. Just like Social Security.

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*Or do they?

For all its administrative clunkiness, the AMT is wonderfully progressive: 90 percent of its revenue comes from those earning more than $100,000 a year, according to the nonpartisan Tax Policy Center. Last week Baucus denounced the AMT as a "monster in the tax code" -- a "Frankenstein," no less. But in an era of rising inequality, you don't slay progressive monsters casually.

The regular federal income tax, in which the lower 50% of households actually pay no income tax, is certainly progressive enough. Unless you're a radical liberal, in which case too much progressivity is never enough.