AMT in Stimulus Forces Better Tax Provisions Out

At Tax Vox, Howard Gleckman casts righteous aspersion on Congress's decision to include of an AMT patch in the stimulus bill:

To get the cost of the overall bill below $800 billion--a key goal of a group of Senate moderates-- and to make room for the AMT patch, the conferees scaled back both direct aid to states and Obama’s Make Work Pay tax credit. The slimmed-down credit will give individuals $400 rather than $500 in cash payments, while couples will get $800 instead of $1000. These proposals would have delivered among the biggest bangs for the buck in the bill. Now that big bang is sounding more like a pop.

This choice has no redeeming economic value. Most people who were in the AMT bullseye did not know it. Protecting them from a tax they never expected to pay will do nothing to encourage them to spend. Worse, most of the benefit will go to higher income taxpayers who are less likely to consume than those lower-income workers who will get less Make Work Pay money. Politics is what it is, but this was a bad economic decision.

Image by Flickr user squishyray used under a Creative Commons license.

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