NCPA - National Center for Policy Analysis

BILL CLINTON'S AMT BOMB

February 23, 2007

The politician most responsible for the relentless expansion of the Alternative Minimum in recent years is Bill Clinton, says the Wall Street Journal.

Consider:

  • In 1993, the Democratic Congress raised the AMT from a 24 percent flat rate to a dual tax rate of 26 percent on AMT income up to $175,000 and 28 percent on AMT income above that amount.
  • They did slightly increase the AMT's family income exemption, but refused to index those exemptions for inflation; so the combination of the higher rates and the failure to index for inflation has caught more and more middle-class taxpayers.
  • Overall, from 1992 to 2002, this Clinton stealth tax hike increased six-fold the number of filers paying the AMT -- to nearly two million from 300,000.

According to the American Shareholders Association, if the AMT rate was moved back to the pre-Clinton 24 percent and the exemption was indexed for inflation at the 2005 level of $40,250, only about 2.6 million tax filers would be subject to an AMT penalty next year instead of 23 million under current law.

The estimated "cost" of this fix to the Treasury over 10 years would be some $632 billion, which is money Democrats in Congress would prefer to spend, says the Journal. But as Senator Grassley notes: "This tax was never meant to tax the middle class, so why should we count it as a revenue loss when we make sure they don't have to pay it?"

Source: Editorial, "Bill Clinton's AMT Bomb," Wall Street Journal, February 23, 2007.

For text:

http://online.wsj.com/article/SB117219901888316934.html

 

Browse more articles on Tax and Spending Issues