The budget plan being crafted by Congressional Democrats will result in massive tax increases for as many as 33 million middle class Americans. This is going to be accomplished through the Alternate Minimal Tax (AMT).
The Alternate Minimal Tax was enacted four decades ago to make certain that wealthy people could not avoid paying any income taxes at all through manipulation of the tax code, with its various breaks and credits. However the Congress neglected to index the Alternate Minimal Tax to inflation. Thus, with every passing year, more and more people who, strictly speaking, are not wealthy have been caught be the Alternate Minimal Tax.
In years past, Congress has “patched” the Alternate Minimal Tax to prevent middle class people from being caught by it. This will apparently not happen under a plan being enacted by the Senate Budget Committee under Sen. Kent Conrad. The ending of indexing of the AMT, plus an extension of the estate tax, is part of a scheme to cut the deficit from $1.4 trillion to $545 billion by 2015.
The tax hike scheme will result in an average increase income tax of $3,700 for 33 million Americans. The AMT tax hike, along with plans to enact a Value Added Tax (VAT), would seem to violate President Obama’s campaign pledge not to raise taxes on people making less than $200,000 a year. Of course that pledge was already violated by tax increases mandated by the health reform law.
Why is the Senate Budget Committee contemplating a tax increase on the middle class and in so sneaky a manner? It would seem to be necessitated by the huge increases in spending mandated by the Obama administration. With the stimulus package, various bailout packages, and other spending increases, the budget deficit has ballooned from the hitherto unacceptable levels of the Bush era to heights unimaginable by previous generations.
Even Congressional Democrats seem to have come to realize that this amount of borrow is untenable and would likely lead to some kind of fiscal collapse as other countries such as Greece are now experiencing.
Unfortunately, spending restraints seem not to be upon the Democrats’ radar. When in doubt, as the saying goes, Congressional Democrats will raise taxes.
Unfortunately, such tax increases will only be added to the bill of particulars of people in the Tea Party movement and others who are irked by high taxes and profligate government spending. The reaction will surely be harsh this November.
Source: Millions face tax increases under Dems budget plan, Andrew Taylor, AP, April 21st, 2010
