The Poor. The Struggling. The Hedge Fund Managers.

On Saturday’s weekly presidential radio address [1], George Bush admonished “Congress” for not yet passing legislation temporarily fixing the Alternative Minimum Tax (AMT).

The decades-old law was initially designed to prevent the ultra-rich from shirking their tax responsibilities through creative deductions. But because the law wasn’t linked to inflation, it will force more than 20 million tax filers next year to unfairly pay [2] a greater than normal share.

Bush crowned himself defender of the "middle-class," using the phrase five times in his short speech. But he quietly left off that term in this passage:

Unfortunately, Congress seems determined to compound this original mistake by making another one. Last week, the House passed a bill that provides relief from the AMT -- but raises other taxes. Congress should not use legislation that millions of Americans are counting on to protect them from higher taxes in one area as an excuse to raise taxes in other areas.

"Middle-class" isn't mentioned because those “other areas” have nothing to do with the middle-class, but primarily with fat and happy hedge fund managers.

And the House bill doesn’t so much “raise taxes” on hedge fund managers, as it closes a ridiculous tax loophole.

As tax consultant clammyc explains at ePluribus Media [2], investment income is taxed at a lower rate (15%) than income from performing services at one’s job (25%-35%) .

But when hedge fund managers carry our their services, their income is called “carried interest” and treated as investment income.

This law is unfair to working Americans on its own merits -- a perfect candidate to offset the loss of revenue that would result from restoring fairness to the AMT.

Of course, that also makes it a perfect candidate for conservative obstruction, as Bush pledged the veto the bill and conservative Senators would surely filibuster it.

But conservatives aren’t the only obstacle in this case. Several Senate Democrats are putting the interests of hedge fund managers ahead of tax fairness. Sen. Chuck Schumer (N.Y.) [3] is opposed to the House bill, and Sen. John Kerry (Mass.) [4] has been lukewarm [5] at best.

Senate Finance Committee Chair Max Baucus (Mont.) [6] deals with the issue by temporarily fixing AMT without bothering to offset the revenue loss. (Senate conservatives have already filibustered that bill too [6], because Baucus included different offsets to the revenue loss from extending prior Bush tax cuts.)

The conservative minority is eager to continue the “block and blame” strategy – block legislation to protect 20 million filers from an unfair tax penalty, then blame the congressional majority for inaction.

But it will be harder to rebut that strategy if the Democratic Party remains split between its core principles and a minority of its donors, and can't speak in a clear voice.