The Observer, April 22, 2005
Volume XXXVII, Issue 26
Bush's back-door tax hike punishes the middle class
Despite the beautiful weather, April 15 may be the gloomiest day of the year. Last Friday was the deadline to file taxes – hopefully, even the procrastinators finished in time. But for some Americans, tax day was especially stressful: in his effort to redefine the tax system, President Bush has created a system which punishes the middle classes to benefit the very rich. Though some may argue that I'm crying class warfare, I'm not – it's the truth. Here's a brief explanation of how the president has redefined the tax system to destroy the middle class.
Since President Bush took office in 2001, his domestic economic plans could be characterized with two words: tax cuts. Unfortunately, as New York Times economist Edmund Andrews notes, "plagued by budget deficits, [Bush] will eventually start raising taxes."
However, instead of repealing the $1.8 trillion tax cuts that were originally scheduled to be phased out later this decade, the President has sought to regain the revenue lost from his excessive cuts on the backs of America's middle class and poor. Enter the Alternative Minimum Tax (AMT) – Bush's ATM to finance his poor fiscal management.
The AMT was conceived in 1969 in an effort to stop the very rich from using accounting loopholes to pay less than their fair share of taxes. Now, Bush has redesigned the code. Instead of the AMT being used to reign in Kenneth Lay (remember Enron?) and his shady accountants, it's being supported by the backs of hardworking Americans.
The hike is twofold: first, the limits of who the AMT affects are moving down the economic scale – instead of affecting the upper middle to the very rich, it hits the middle classes exclusively. Second, according to budget projections, the AMT must account for more of the tax base than it currently does. This thinly veiled language opens the back door to tax rate increases.
This "robbing Peter to pay Paul" has been brought to the president's attention, and to his credit, he's promised action. Unfortunately, that promise is likely all the relief that the working families will see. After appointing a commission to redesign the AMT, the President stipulated that all changes must be "revenue-neutral" – that is, they can't actually suggest cutting the tax or realigning it around the economic classes it was designed to affect. This begs the question: if the commission can't actually do anything to fix the tax code, why is it here?
The paradox faced by the AMT commission is – unfortunately – not surprising. From the war in Iraq, which was supposed to be fought on the cheap, to the No Child Left Behind boondoggle which has paralyzed public education across the country, doublespeak is certainly the administration's language of choice.
The greatest doublespeak of all is the portrayal of Bush's character as a middle-class hero. He began in 2001 by parading poor families around Washington, promising that their taxes would be less and their lives easier if we'd only get rid of the pesky capital gains tax. Then, we were told that the estate tax was taking money from working families as they mourned the loss of a loved one.
As it turns out, the capital gains tax was a vital source of revenue which poor people (who on the whole don't own stock) didn't pay, and the estate tax only affected the top richest families in the country – not family farms, small businesses, or modest inheritances. Four years later, Bush's "model" families are poorer, sicker, and their children have fewer opportunities. What a parade.
Certainly, the trend in the administration has been to pay lip service to the middle classes – the modest tax credit, the prescription drug plan – while at the same time cutting the programs they rely on to advance in society. Pell grants have been slashed, Social Security is being destroyed, healthcare is more expensive (in proportion to disposable income) than ever before. Now, the administration is saying that the middle class hasn't paid enough taxes – time for a back-door tax hike.
Bush may argue that his tax plans are "for the sake of American workers," but unless the average American worker is pulling down six figures, and has an accounting team worthy of Arthur Andersen, the new tax codes hurt. Now, 2.9 million families can each count 6000 ways – one for each of the extra dollars they're spending – that the AMT is bad for America's middle class.
