Another Bush Tax Cut

Wall Street Journal December 20, 2007; Page A16

Nancy Pelosi and her fellow House Democrats surrendered to reality yesterday, grudgingly handing President Bush and taxpayers another victory. They finally passed a one-year "patch" that will prevent the Alternative Minimum Tax from hitting some 22 million middle-class Americans when they file their 2007 tax returns next year.

Congress passed the AMT in 1969 to hit a handful of millionaires who were said to be exploiting too many loopholes also passed by Congress. But because it isn't indexed for inflation, and because Democrats raised AMT rates in 1993 to 26% and 28% from a single rate of 24%, the AMT has turned into a blob that sucks in ever more taxpayers earning between $75,000 and $200,000 a year.

Now back in the majority, Democrats have found themselves hoist on their own 2006 campaign pledge for "pay as you go budgeting," which meant offsetting any AMT tax "cut" with $50 billion in other tax increases or spending cuts. Mr. Bush and Republicans sensibly argued that, because it was never intended to hit so many people, the AMT shouldn't be used as an excuse to raise taxes on other Americans. And with an election year coming, Senate Democrats didn't want to raise taxes on their rich hedge-fund donors. So House Democrats had little choice but to abandon "paygo" as well and pass AMT relief without any offsetting tax increases.

This is good news for the economy, which is struggling enough without a new tax on private equity or other risk takers. Even better for the longer term, this Democratic decision to abandon paygo may foretell less damaging economic policy in 2009. The main goal of paygo is to make cutting taxes all but impossible, and in particular to prevent any extension of the lower Bush tax rates that expire after 2010. This year's AMT fight has exposed paygo for the political fraud it is, and sets a precedent for abandoning it in 2009 in order to avoid walloping the economy with an even bigger, and more damaging, tax increase.

Democrats will of course have to come up with another one-year "patch" in 2008 before the election, and already they're promising that this time they really will stick to paygo. Right. Our own advice is that Democrats could avoid these annual acts of political masochism if they'd merely repeal their own 1993 AMT tax-rate increases, which would stop the tax from snaring so many voters in their own "blue" states. Meantime, who would have guessed that a Democratic Congress would continue Mr. Bush's streak of cutting taxes in some form in every year of his Presidency. Congratulations, Madam Speaker.

Dems Call for Taxes on Wealthy at Debate

What else is new? Tax the wealthy-tax big corporations. Tax relief for the middle class and the poor. . The rhetoric to the uninitiated is high-minded and seems to make sense. But change it a bit and you get the the reality.

Tax the successful, tax the winners, reward the mediocrity...reward the losers. If you think this is the future success story for America, than by all means vote for your favorite Democrat. I pray Americans are smarter than that, but when they get a chance to vote for a 'free lunch'..all bets are off.