The finishing touches appear to have been put on a $70 billion tax-cut package, which includes extending the tax break on dividend income and temporarily shielding some middle-income taxpayers from the Alternative Minimum Tax.
While I don't have a problem with the dividend break and I've long suggested that the AMT needs fixing, this bill is troublesome on several fronts. CNNMoney has a nice analysis of the provisions, which I will refer to as I go.
One, it doesn't fix the AMT; it's a temporary stopgap. And it only shields households earning $62,550 or less ($42,500 for single filers). Households earning more than that could still find themselves unjustly affected by AMT.
Two, the economy is chugging along okay, so the "stimulus" logic behind extending the dividend break is murky, especially in a time of hefty deficits.
Three, the lawmakers essentially ignore how to pay for these cuts. Or they use smoke and mirrors, such as a provision allowing wealthy taxpayers to convert traditional IRAs to Roth IRAs. Such a move takes money that would have been taxed years from now and taxes it today, robbing future governments of substantial revenue in order to support the current unsupportable levels of spending.
Fix AMT because it's broken. But pay for it. And with other tax breaks, the presumption should be against them. Adults pay their bills rather than run up debt; before embarking on new spending and tax cuts, let's pay the bills we've already rung up.
AMT, taxes, budget, deficit, politics, midtopia
Tuesday, May 09, 2006
Republicans fashion tax-cut extension
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2 comments:
I wonder if Republicans know Ye Olde Trickle Down Theory doesn't really work that well in today's global economy. There was a brief mention of that in a WaPo OpEd today:
http://www.washingtonpost.com/wp-dyn/content/article/2006/05/09/AR2006050901504.html
"This at a time when the entire theory of trickle-down has been negated by the propensity of U.S. corporations to use their shareholders' investments to expand abroad rather than at home. "
So either their economic plan needs a major overhaul or they are just living up to their stereotype of pandering to the wealthy.
Drye, good point, that had occurred to me but I need to revisit that globalization angle.
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