How Bush Helped Create the AMT Problem

President Bush is continuing to attack Congress [1] for not yet passing legislation to prevent the Alternative Minimum Tax from making millions of Americans unfairly pay a greater than necessary share in taxes. He raised the issue three times [1] in the last [2] four days. [3]

What Bush regularly leaves out is his own role in exacerbating the problem, using the AMT to hide the real cost of his reckless tax cuts, and expanding those affected in 2007 from 10 million taxpayers to more than 20 million.

On Friday, the Center for Budget and Policy Priorities reminded folks of recent history: [4] (emphasis original)

Various Administration officials, senators, and House members are urging Congress to waive its Pay-As-You-Go rules and deficit-finance the Alternative Minimum Tax (AMT) “patch.” The AMT’s explosive growth, they argue, was unanticipated and unintended, and so measures to prevent that growth should not have to be paid for. Even if the AMT’s growth were unanticipated, this would not justify waiving PAYGO for AMT relief. But the claim is also false.

To the contrary, lawmakers not only anticipated the AMT’s explosive growth, they counted on it to mask the cost of the 2001 tax cuts. The Administration and congressional tax writers were well aware that the legislation they pushed in 2001 would force millions more taxpayers to pay the AMT, which would take back part or all of their tax cuts and thereby reduce the 2001 tax bill’s apparent cost. More than two thirds of the cost of this year’s AMT patch is due to actions taken by Congress and the Administration in designing the 2001 (and 2003) tax cuts.

As Charles Grassley, [R-Iowa,] then Chairman of the Senate Finance Committee, said in 2001, “President Bush’s plan [will] bring millions more Americans into the AMT process; the Joint Tax Committee estimates that the Bush tax plan will nearly double the number of American taxpayers affected by the AMT.”

All of Bush's current spin is to block the House bill, which dares to responsibly offset the cost of temporarily fixing the AMT by closing the ridiculous loophole [5] that basically says hedge fund managers should pay less taxes than folks in every other occupation.

But the reality behind Bush's spin is another reminder that tax cuts are far from the solution for all problems at all times.

The overall goal for our tax system is taxation with representation, fairly raising enough revenue so our government can do the tasks we assign it. Sometimes tax cuts can help achieve that goal, sometimes they make matters worse.

The record on the Bush tax cuts is clear.