Today, Congress approved a one-year postponement of the Alternative Minimum Tax, which is good news for an estimated 25 million Americans (mostly middle-class) who would have qualified for it this year. The IRS said that due to the last-minute nature of the change, some refunds may be delayed: “Changes in the tax code require substantial work, especially in reprogramming I.R.S. computers.” The IRS says that “within 72 hours it would post on its Web site revisions to a dozen forms affected by the change.”
Now the bad news: due to much partisan fighting over the issue, the vote didn’t include a way to pay for the one-year reprieve, which means our national debt will increase by $50 billion next year.
House Democrats angrily approved the bill after giving in to demands by Congressional Republicans and President Bush that the tax cut not be offset by raising other taxes. Democrats started out the year by pledging to pay for the $50 billion cost of the A.M.T. fix with cuts in spending or increases in taxes elsewhere. The Democrats repeatedly tried to get Senate Republicans to back a plan that would have paid for the cut by imposing new taxes, particularly on wealthy hedge fund managers. But the Republicans refused, leaving Democrats little choice but to break their promise. By not offsetting the cost, the national debt will increase by $50 billion.
“The only reason this bill is not paid for is because Republicans almost in lock step in both bodies have prevented us,” said Representative Steny H. Hoyer of Maryland, the majority leader, in one of several furious speeches by Democrats on the House floor.
So, you know, hooray for not being held captive to an outmoded parallel tax system that wasn’t indexed to inflation, but we’re having a harder time feeling enthusiastic about it when we wonder how we’re ultimately going to pay for it. (Maybe we can sell that extra wireless spectrum to China!)
“Congress Votes to Spare Millions From Alternative Tax” [New York Times]