NCPA - National Center for Policy Analysis


November 7, 2007

The Alternative Minimum Tax will soon explode on 20 million middle-income taxpayers if Congress fails to pass relief soon.  Trouble is, Democrats need $50 billion to do it, thanks to the "pay as you go" budget rules they imposed on themselves earlier this year, says the Wall Street Journal.

As a result, it seems Democrats are preparing a raid on the Federal Aviation Administration (FAA) trust fund to offset the AMT assault on the middle class:

  • Airline excise taxes (on tickets and fuel, among other things) raise about $10 billion a year.
  • Multiply that by the five years in the paygo budget window and you happen to hit that $50 billion AMT target.
  • Even better for Democrats, this would mean they don't have to take the political heat for raising taxes on anybody else to offset the AMT.

The big problem here is that the aviation excise tax is supposed to be dedicated to aviation, says the Journal.  This includes funding FAA operations, as well as modernizing the air traffic control system, which certainly needs it.  So amid growing airline flight delays and congestion, Congress may pilfer that airline money and use it instead to solve a political problem of its own making.

The larger point here concerns truth in budgeting, says the Journal.  Democrats campaigned on paygo last year as a tool of fiscal discipline, but the airline ruse shows that it is really a driver of fiscal chicanery.  Its main goal is to make it all but impossible to cut taxes, thus dooming the Bush tax cuts when they are set to expire after 2010.  But in the short term, paygo is forcing Democrats to resort to all kinds of budget contortions to disguise their real tax and spending intentions.

Source: Editorial, "Air Traffic Heist," Wall Street Journal, November 7, 2007.

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