Congress Postpones AMT Expansion For One Year

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]


Edit Your Comment

  1. hypnotik_jello says:

    Uhh, maybe whack $50 billion off the war funding? Just maybe? Naaah….

  2. Parting says:

    US economy is starting to sound like a story of a subprime mortage loan. Lets spend the money that we don’t have. We can always refinance. (Or our grandchildren will bail us out).

    If a government isn’t responsible in it’s spendings. How it can expect a level of personal responsibility of it’s residents.

  3. Parting says:

    I just hope, next government will turn things around. Before a big crash, which will make mortage industry crisis seem like ”good old times”.

  4. Parting says:
  5. Grrrrrrr, now with two buns made of bacon. says:

    And to think in 2000, we had a budget surplus.

    The AMT was indexed to wages levels of 1969 and was not indexed to inflation, and was intended to keep 155 of 1969’s highest income households from avoiding paying taxes altogether. Wages and prices have changed just a wee bit from 1969, so it’s about time they took the AMT out into a field and shot it.

    One overly-complicated loophole-ridden tax system is enough; we certainly don’t need a second one hiding in the shadows to kick you in the stomach when you’re least expecting it.

  6. Grrrrrrr, now with two buns made of bacon. says:

    @hypnotik_jello: But what’s $9,153,138,000,000 compared to the cost of cheap oil? (well….assuming that had worked)

  7. warf0x0r says:

    @dwayne_dibbly: Even if it had how much would I care about saving .75 cents on gas with our gov’t spending billions on the war machine. All things aside high gas costs to me would be acceptable without the financial turmoil our country has created from greed… imho.

  8. humphrmi says:

    which means our national debt will increase by $50 billion next year

    This is the specious logic that the Democrats want us all to believe if they keep saying it enough.

    OK let’s get this strait. The AMT has been patched. It was patched last year, as it has been every year as long as I can remember, to prevent the same group of people from being ensnared by it year after year.

    Folks, this is money we’ve never collected. We can’t lose money we never had in the first place. It’s never been in the government’s coffers before, and it’s not being taken out of the government’s coffers this year. It’s the tax that has never been collected. It never existed to begin with. You can’t lose something you never had.

  9. joeblevins says:

    Humphrmi – Don’t confuse the issue with facts.

  10. savvy999 says:

    The national debt is 9 TRILLION dollars. $50B is another 0.5%

    For a person earning $50k a year, that’s like putting a $250 Wii on your credit card…

    … and then sticking your unborn great-grandchildren with the bill (plus interest).

    Nice job, Dems. Poorer job, GOP. Whatever happened to real conservatives?

  11. shan6 says:

    @savvy999: Fiscal conservatives don’t exist anymore.

  12. backbroken says:

    @humphrmi: Yeah, I love that logic. While we are at it, let’s repeal the income tax for 2008! After all, that’s money that the government hasn’t collected yet, so how can it affect the deficit!? Who knew economics could be so easy?

  13. humphrmi says:

    @backbroken: You clearly don’t follow the logic at all. The AMT has never been collected against the middle class. Income tax has always been collected, every year. Claiming that we will “increase the deficit by $50 billion” is ignorant of the fact that we never collected that AMT money from the middle class, ever. Claiming that’s the same as not collecting income tax at all is the same specious logic that the Democrats use to try to make us feel guilty about not funding a tax break that has never been funded in the past, because it was never intended to hit the middle class to begin with.

  14. Snarkysnake says:

    Sadly ,typically, there won’t be a long term “fix” for the AMT because both sides have learned that they can use this monstrosity to their advantage. The “R”s can keep doing these one year patch jobs and tell their voters (and contributors) that they “stopped a tax increase on the middle class”…The “D”s can tell their voters (and contributors)that they are trying to “make the wealthiest pay their fair share” by keeping it alive.Meanwhile,the true middle class that were never supposed to be subject to this punitive tax just keeps hunkering down,waiting for it’s repeal…

  15. johnva says:

    @shan6: Yes they do. They just don’t vote Republican anymore.

  16. Beerad says:

    @humphrmi: Um, hi there, I’m the middle class and I paid AMT last year. So, uh, yeah, it gets collected.

  17. kimsama says:

    @johnva: Haha, zing!

    Yeah, I guess the Bush plan was to do the big tax cut, start a war, bleed the economy dry, then have the AMT hit the middle class. It’s all becoming clear, now…

  18. Lars says:

    To those worried about our national debt, let me pose a few questions.

    1. What is U.S. currency backed by?
    2. Is U.S. currency a commodity with limited supply, like say oil?
    3. Who has the right to print U.S. currency?
    4. Why does our country “borrow” money from China?

    Much of our economic problems stem from our outdated mode of money creation. We put the power to create money in private hands that are not held accountable in any democratic process. This is problematic. If you’re interested in these questions at all, I suggest you visit the American Monetary Institute’s (AMI) website:


    Many of our economic problems will not be solved until we address the money question.

  19. Beerad says:

    @kimsama: Plan? There was a plan?

  20. disavow says:

    @humphrmi: That’s how it should work, but the government doesn’t follow your logic. Budget projections routinely assume the AMT won’t be patched, giving lawmakers billions of dollars in pretend money to play with. Clearer accounting wouldn’t fix the gap, but it would shed more light on how dishonest those projections are–and hopefully shame Congress etc. into spending less.

  21. humphrmi says:

    @disavow: So the problem isn’t that congress is robbing government coffers of billions of dollars without offsetting it. The problem is that the people (who we probably don’t elect) who do budget projections are idiots, and because of that, the government will now run a higher deficit.

    OK Fine. I can live with the latter argument. Flame the stupid people who did the budget projections based on an unpatched AMT. What I can’t live with is the (former) argument that the deficit increase is caused by limiting the impact of a tax that was never supposed to impact certain people to begin with.

  22. superborty says:

    Lower taxes actually equally higher revenues. Would be nive if anyone ever looked at the effect of tax cuts.

  23. squidbrain says:

    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.

    I’ve got an idea. . . why don’t they. . . CUT SPENDING!

  24. superborty says:

    Think of the children!

  25. backbroken says:

    @humphrmi: What exactly does the deficit have to do with the projected budget? Since we have been running deficits for several years with no end in sight, I’m guessing that the amount Congress decides to spend bears little resemblence to the amount they project will be collected.

    Even if spending was tightly tied to the projected budget, they are surely counting the middle class AMT in those projection. The projected budget weighs what happened in 2006 more heavily than what happened in 1978. And in 2006, the AMT slammed lots of middle class wage earners.

  26. humphrmi says:

    @backbroken: Granted, and you’re kind of making my point, which maybe got lost somewhere. I’m tired of hearing about how Congress and/or the President will “increase the deficit” by billions of dollars because they failed to “fund” a “tax cut” that was never supposed to be a tax (on certain people) to begin with.

    And yes, despite the patches, the AMT continues to crawl it’s way into the wrong set of taxpayers. It was intended to close some loopholes that let high-income taxpayers get away with paying almost nothing – in 1969. It was never intended to ensnare normal working folks, but it wasn’t indexed for inflation. So it’s not working as intended in 1969. Ergo, it should be repealled, and a new tax that truly meets the intention of the tax should be implemented – and indexed for inflation, so we don’t have this same problem again in forty years.