Friday, April 15, 2005

Wall Street Journal embraces Complex Tax Code

The Wall Street Journal editors today endorsed leaving the AMT unreformed until inflation forces millions more taxpayers to pay the tax and it can replace the income tax.

Many economists also believe that tax reformers could do worse than letting the AMT grow until it actually replaces the regular code . The AMT is a modified flat tax with lower rates (26%, and 28% on more than $175,000) than the current top marginal rate of 35% (or about 37% with PEP and Pease). It would have to be indexed for inflation, and its wicked complexity would have to be undone so it didn't raise marginal rates for most Americans. But moving in the AMT's direction of top marginal rates in the 20-percent range and fewer deductions is where useful reform will have to go.

For those of you afflicted by the tax, the WSJ editors think it should be used as a bargaining chip to force Democrats to accept other tax reforms the WSJ considers a higher priority.

So, for those of you among the 34 million expected to be hit by the AMT within the next few years, you now know the WSJ editors don't really care if you get hit with the AMT, and that the WSJ editors don't really want tax reform to minimize complexity, but instead, they want tax reform to minimize taxes on people richer than you who work for less of their income than you do. They'd go along with reform of the AMT, but only if as part of a bargain.

The price of admission on the GOP tax cut wagon seems to be getting higher. Must be all of Tom Delay's legal defense bills and the high cost of trying to sell the American public on phasing out Social Security.


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