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Monday, April 23, 2007

Reconciling the Irreconcilable

Congress has a problem, and they are at a point where they have to deal with it. It's not the Iraq funding bill, they are going to buy themselves more time on that by allowing it to be vetoed.

No, this one has to do with reconciling the promise by Nancy Pelosi and Harry Reid to restore the "pay-go" rules of the 1990's with their desire to turn the Alternative Minimum Tax into a issue that they can claim.

As a person who's been whacked by the ATM once, and will definitely get hit by it next year, I want to see it fixed. For those that don't understand, nearly 40 years ago Congress passed the ATM to nab a 150 or so super rich folks who didn't pay any taxes due to deductions and exemptions. Unfortunately, Congress then, and since, hasn't fixed it's glaring issue, it isn't indexed for inflation. So now something designed to snare the rich is getting ready to hit the middle class, about 20 million of them.

The problem is, a true fix, indexing the ATM, would cost $50 billion a year under the Pay Go rules that Congress has imposed on itself. They have given waiver provisions in those rules, but granting a $50 billion dollar waiver would make for good political attack ads next year, so they probably won't.

That means they have to either cut money, a lot of it, or jack up taxes somewhere, which is the other problem. The Dem's want to frame the ATM as a "tax cut" for the middle class, even though most have never paid the ATM. If they do as they propose, jack up rates on the top end of the ATM, and index it, the numbers will show that the middle class didn't actually get any true relief, there was just a $50 billion tax hike somewhere.

The GOP doesn't want the Democrats to have ATM as "their issue", so they may be willing to stall fixing it, then claim that the Democrats in control of Congress didn't do anything to help 20 million Americans. Considering the fact that we are great not understanding soundbites, not facts, it's probably not a horrible political strategy, it's just a bad one for tax payers.

Hopefully, at some point the two sides come together and do the right thing for taxpayers, instead of trying to do the right for their respective parties, but I'm not holding my breath.

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