(to borrow a phrase from Carly Simon)
Great piece on the cyclical nature of taxation
Everyone who looks at the numbers knows that taxes must go up. If we do nothing at all, the years 2007 through 2016 will bring deficits of $3.5 trillion outside of the surplus in Social Security. But doing nothing assumes that all the Bush tax cuts will be allowed to expire as scheduled in 2010 and subsequently. If the tax cuts are extended, and spending remains generally unchanged, the 10-year deficit will total $7.8 trillion. To balance the budget under these conditions would require cutting defense spending by 67 percent, Medicare by 54 percent, or every other program by a third, something that no one in politics has shown any willingness to do. The current path leads straight into a severe economic crisis.
I'll be really surprised if the Democrats address the AMT, for two reasons:
- Political: The AMT uses a progressive tax incidence; to fool with it - in its entirety - would also alleviate taxes on the richest Americans, something that flies in the face of one of the major complaints of the Dem voter bloc.
- Financial: If the AMT is eventually pegged to inflation then that drops the projected AMT tax revenue by a Saganesque billions and billions.
Economic populism has some wonderful benefits...in the short term. And the AMT probably should track with inflation, if just out of fairness of tax burden. But historically it ends up with higher inflation and unemployment. I hope the powers that be can learn from history and please, PLEASE listen to the advice of the Federal Reserve board.