THE MOTHER OF ALL TAX HIKES
October 30, 2007
Both Republicans and Democrats agree that the exploding Alternative Minimum Tax (AMT) is bad news for taxpayers and the economy. But House Ways and Means Chairman Charlie Rangel's (D-N.Y.) proposed alternative will not solve anything, says Dick Armey, former Republican majority leader of the U.S. House of Representatives.
Rangel's bill starts simply enough with a one-year extension of AMT relief provisions. But paying for it will not be so easy, says Armey:
- Democrats have sown the seeds for additional taxes with their "paygo" rules, which require all tax cuts to be offset by revenue increases elsewhere.
- For a temporary $40 billion AMT fix, Rangel has targeted one of the more productive and dynamic sectors of our economy -- the financial-services industry.
- With several new provisions that will increase taxes, including higher taxes on so-called "carried interest," the bill will affect hedge funds and possibly other partnerships.
Beyond this year's temporary AMT patch, the bill would permanently end the AMT in 2008. However, it would raise other taxes as well:
- Rangel's bill increases tax rates by 4 percent on singles who earn above $150,000 and couples who earn over $200,000.
- This increase will come on top of the rollback of the 2001 and 2003 Bush tax cuts.
- The combined result -- America's top income-tax rate will skyrocket from the current 35 percent rate to a top rate of 44 percent -- a 25 percent tax hike.
So much for low-tax America and high-tax Europe; this would put the nation's top rates among the highest of all developed nations, says Armey. This is an especially heavy burden for American farmers and small businessmen who pay taxes as individuals.
Source: Dick Armey, "The Mother of All Tax Hikes," Wall Street Journal, October 29, 2007.
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