Year of AMT Pain Worth the Gain?

RUSH: Let me go to the Alternative Minimum Tax. I’ve got a theory on this. You know, Charlie Rangel proposed this massive huge tax increase, $1 trillion, just is a trial balloon, and it’s Mrs. Clinton’s tax increase, and I don’t care what anybody thinks, and she’s trying to distance herself. Pelosi’s trying to distance herself from it. But they floated this, and they have no intention of this being passed this year or next. This is for 2009 when they win. But there’s this little glitch in there, the Alternative Minimum Tax. Charlie Rangel wants to get rid of it.

He’s got about a week, week and a half to do it before the IRS says it’s too late because we’d have to reprogram the computers, and we need to be able to do that by the first week of November to get ready for the next tax collection season. The Alternative Minimum Tax captures a bunch of money from people from whom it was never intended to be captured. The rich! It was a soak-the-rich tax, and look what happens. The Alternative Minimum Tax is another microcosm for exactly what liberalism is. The Alternative Minimum Tax, the original idea, was to capture taxes from wealthy people who, using the tax code, didn’t pay any taxes. Now we’re on the verge of it entrapping 20 million Americans who are not rich, who are not ‘wealthy,’ quote, unquote, and people are starting to make it a political issue, campaign issue, so Rangel wants to be the guy to try to get rid of it — and then, what I’ve been thinking of is, maybe we should take the pain of the AMT for this year only for the sake of long-term gain in the form of sensible reform on this. This is last night on the NewsHour with Jim Lehrer, the fill-in hostette was Margaret Warner. She said, ‘Even though you unveiled this big tax overhaul, really what you’re focused on now is the one-year fix for the AMT. I think it’s going to cost, what, 65 billion? You want some tax increases to pay for it?’

RANGEL: We know how to do it. The big issue that we are going to find is that I hear from the Senate side that they just want to borrow the money, examine, act like this just didn’t happen, and the same way President Bush borrowed the trillions of dollars for the income tax cut that he had, that they want to extend this in order to temporarily put off the Alternative Minimum Tax. We have to remove the $60 billion tax increase off 123 million people. We know how we want to do it. I’m waiting to hear how they intend to do it.

RUSH: Boy, I tell you this is so rich. He borrowed the trillions of dollars to pay for his tax cut? You have to understand the mind-set of a liberal Democrat. The mind-set of a liberal Democrat is that all money is Washington’s. All money is Washington’s, and what you end up with at the end of the year is what they have decided to let you keep from what you’ve earned. The government will never, ever, do with less. There will never be cuts in the size of government or in the total budget that government spends every year. There will only be increases. So if we’re going to cut the Alternative Minimum Tax, which collects $65 billion from people who were never intended to pay it anyway, then why should the government get it back? It was never intended, quote, unquote, to be collected from people who are now paying it. But that’s not how they work. Here’s the second question. She said, ‘Well, we’re going into an election year. Tell me how you think this issue, both the AMT and your proposal for broader tax overhaul as a factor in the elections, is it going to be something that’s going to really be a flag that the Democrats carry?’

RANGEL: Well, it would be a good flag. It would be a great banner. It talks about simplification, incentives for economic growth. But to get back to the AMT, the temporary problem, no matter what is said, there’s only one question: Are you going to borrow the money in order to give this $60 billion of relief, or are you going to raise the money by inequities in the tax system and balance it out? We say we’ve done enough borrowing.

RUSH: The 65 billion, the 60 billion was never yours, Charlie. It was never intended to be yours. If you’re going to give it back, give it back, and cut some spending somewhere along the line. Now, ladies and gentlemen, I — your host, your guiding light — have never supported any tax increase, never, never, never. But, with this Alternative Minimum Tax and the tax increases that it will bring to 20 million odd families, I’m beginning to wonder if the pain for one more year might be worth the gain. I know this may sound to you like I’m supporting a tax increase. I’m not supporting something. I’m thinking out loud here. The AMT was created by liberals. The AMT has been supported by liberals. The AMT has been approved by liberals, and it was turned into a near disaster by ex-President Clinton because it was expanded to include family income that was never intended to be included under the AMT. Next year, if it’s not changed, the Alternative Minimum Tax will affect not the handful of citizens it was intended for, not the three million that it now affects. Well over 20 million largely upper middle-class families will be affected by the AMT next year. That’s why there is such a push now to try to do something about it.

Because, in truth, elected officials know in an election year, if 20 million upper middle-class families all of a sudden find themselves paying far more in taxes than they ever intended and planned to based on a program that was never intended to entrap them, there’s going to be hell to pay at the ballot box. You know, Ernest Hollings used to say, ‘There are a lot of lessons we can learn out here.’ The class warfare crowd would finally learn that plans to ‘soak the rich’ end up soaking them. This is why I’m thinking there might be some value in this. The AMT was a soak-the-rich plan and look who it’s going to soak! It’s going to soak middle- and upper-income families. It was never intended to, right? It’s a liberal idea. Look at who it’s going to hit. The blue states, the people in the blue states would learn a lesson about liberal incrementalism. First you’re told the plan is really great. It’s really nice, and it’s only going to target those eeeeevil rich people. Then over the years it turns very un-nice. It turns very mean, and it starts to entrap you; when you thought only the rich were going to suffer, you end up suffering, too! For one reason: Liberals invented the tax. The Clinton crowd, dense as they are, would learn what a slick politician he really is.

He should have, and he could have prevented this in his 1993 tax increase plan, but he knew he’d be long gone before reality hit. Yeah, liberals want the money, but they want control over people’s lives as well — which brings us now to the greatest lesson of all in this. The liberals made a mistake when they first wrote this up by not indexing the tax to inflation. So the money that it projects, as it’s going to collect, to put it bluntly, is ill-gotten. In the real world, they would just eliminate this because it’s unfair. It is starting to entrap people, and I’m using that word on purpose, that it was never intended to entrap. They would say they’re sorry. They would say, ‘The program has gotten out of hand and move on. We’re just going to cut it.’ Okay, so it’s $65 billion. Eat it, government. You have over three-trillion-dollars in the federal budget to play with. Eat the 65 billion! Don’t sit there and tell us how you gotta raise tax somewhere else to make up for this. Eat it. Sixty-five billion as a percentage of three trillion? Do without five bucks for a year! ‘Oh, no! No, no, no, no! We can’t do that.’ But see, they’ve already committed the money. They have virtually spent the money they didn’t have, and now they admit that they didn’t deserve. That’s what Rangel is saying. Okay, so, do they roll back the spending as they should, or do they raise matching funds by pulling all the same tricks?

Do they go out and play class warfare, make it sound good until incrementalism sinks in, have sneaky little fine print that won’t be apparent until they, like Clinton, leave office? You want to fix it for one year, Mr. Rangel? Fix it forever! He just wants to fix it for one year on an election year. See, this is why I ask: Would the pain of this tax increase be worth the gain? Would the pain of a bunch of people learning how soaking the rich soaks them be worth it, during an election year? Would it? It’s something to think about. I don’t know if it would turn the blue states bluer or turn some blue states toward the red. But all of America would learn the rule of liberal politicians. The rule of liberal politicians is: They make a mistake, you pay. They make another mistake, you pay. They make another mistake, you pay. The decent thing to do is to just can the thing. Perhaps the greatest lesson of all: The AMT was a mistake that must be ended. They weren’t entitled to this money, but they already spent it. They spent it all. They haven’t collected all the money yet, but they have spent it all. We’re running a budget deficit. It would be a learning experience, I think, for the blue states, a two-by-four across the noggins of the class warfare crowd. This could end up being that, the pocketbook lesson for the blue states and their love of more spending. Let’s show the blue states and let’s show some Doubting Thomases maybe in the red states, what liberal ‘soak the rich’ really means. The AMT was designed to soak the rich. It’s going to get 20 million Americans next year who were never intended. Is it worth them feeling the pain to learn the lesson how liberal legislation on tax policy works?