No New Taxes? Don't Read His Lips

[napi21]

http://www.tompaine.com/articles/2007/02/23/no_new_taxes_dont_read_his_lips.php

President Bush is planning on raising taxes, but he won't come out and say it. In fact, he has continued to loudly proclaim he can balance the federal budget by 2012 and not raise taxes one cent. His rhetoric on the budget is misleading, if not outright deceitful, precisely when having an honest discussion is paramount to implementing policies to confront the long-term fiscal challenges our nation faces.

Although he claims that he can balance the budget by 2012 without raising taxes, Bush's 2008 budget calls for increasing taxes on the middle class by $800 billion over the next 10 years. Even more audacious is that those higher tax revenues are financing more tax cuts for the wealthy, especially those making over $1 million annually. If Bush wants to cut taxes for the super wealthy and balance the budget on the backs of the middle class, he should say so, but he doesn't. He buries the plan in the fine print of his budget.

Here's Bush's sleight of hand: Through a "stealth tax" known as the Alternative Minimum Tax (AMT), more and more middle-class taxpayers are being drawn into an alternate taxation universe each year. The extent to which AMT tax liability falls on the middle class is startling. In 2006, 8.6 percent of the AMT was paid by households earning less than $200,000, but in 2010, those households will be responsible for paying 45 percent of it. Under current tax law, 50 percent of households earning $75,000 to $100,000 will be subject to the AMT in 2010, up from 0.7 percent last year.

Congress has acted in the past to prevent the middle class from getting sucked into the AMT black hole, at a cost of about $60 billion per year, and they will do so again in the future. The president’s budget even acknowledges as much. However, the president assumes that, contrary to history and the pronouncements of lawmakers, Congress will allow the AMT’s reach to extend to millions more middle-income taxpayers year after year. Bush’s budget fails to reflect reality by including increased AMT revenue in its calculations to help balance the budget. The reason for this fanciful accounting—a permanent AMT fix could blow a half-trillion dollar hole in Bush's balanced budget plans.