AMT as Economic Stimulus? That's Just Crazy!
by Adam Hughes*
Jan 15, 2009
Yesterday afternoon I came across a crazy headline in the CQ Midday Update email we get here at the Budget Brigade and I had to read it twice because I couldn't believe it. "AMT 'Patch' May Be Added to Economic Recovery Package," it read. Hmmm...that just seems crazy, totally crazy. What exactly does patching the Alternative Minimum Tax have to do with economic recovery? I'll tell you - absolutely nothing.
Congress has passed legislation to "patch" the AMT in each of the last couple of years, which keeps millions of middle and upper-middle income families from having to pay the tax, which was never the intention of the AMT. Congress usually waits until the last possible minute after hemming and hawing about not having the
political will votes to pass a long-term solution to the AMT or even pass a one-year patch that is deficit neutral.
Whether you agree or disagree with this approach to the problem of AMT bracket creep, it is pretty clear it is not related to the economic downturn. There are no additional Americans who will pay the AMT because of our sour economy (in fact, there will likely be fewer because of it) and for those who do have to pay it, the bill won't be due until April of 2010 at the earliest. What's more, most people don't even know they have to pay the AMT until they start their tax returns, so it is not likely to impact spending decisions or economic behavior.
So why are we even discussing this? Well, by adding the AMT patch to the stimulus package, Congress, particularly congressional Democrats, can pass the proposal under an "emergency" designation, and will be able to claim that they have not violated PAYGO budget rules. This, of course, is about as crazy as previous attempts by Congress to pass Iraq war funding bills under an "emergency" designation and keep a straight face.
The AMT patch is simply not an emergency item and attempts to slip it into the stimulus package show Democrats not only have abandoned their commitment to fiscally responsible budgeting, but are not even interested in testing the issue with a vastly different Congress. This is probably the craziest part of all. Attempts in the past to pass a deficit-neutral AMT patch failed in the Senate because Republicans resisted any proposal that was offset. Given that Democrats added 8 seats in the Nov. elections, don't you think it's worth at least one more attempt to pass a deficit-neutral patch this year? Not trying would, well, it would just be crazy!back to Blog