Saturday, April 15, 2006

Help the rich, hurt the middle class

While Republicans push to permanently bury the estate (er, "death" ) tax, they appear willing to sock it to the middle class.

Unless Congress takes action, one in four families with children — up from one in 22 last year — will owe up to $3,640 in additional federal income tax come next April.

Few of them realize that their taxes have increased, because Congress has not voted to raise taxes. Instead, Congress let a tax break expire. That break limited the alternative minimum tax, which takes back part of the tax cuts sponsored by President Bush.

That's right. While we argue about a tax that only affects the top 1% of estates, we ignore a tax that everyone agrees is broken and affects far more people.

This makes sense why?

I've argued before that the estate tax makes sense -- or at least, repealing it now doesn't make sense. It's a matter of priorities.

In addition, if AMT doesn't get fixed, it'll be because Congress decided to protect a tax break for dividends instead. The difference:

The A.M.T. will cost Americans who earn $50,000 to $200,000 nearly $13 billion more next April. That is about how much people who earn more than $1 million will save because of the break on investment income like dividends and capital gains.

The next time someone starts talking about why we need to eliminate the estate tax or reduce taxes on investment income or fix anything else in the tax code, tell them "Fix the AMT first; then we'll talk."

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