One thing Congress should do before Christmas is repeal or delay the Alternative Minimum Tax (AMT). If we don’t, when April taxes are due, about 25 million Americans – many of them middle class – will have to send an average $2,000 more to Washington.
The AMT proves the old saying that once government initiates a tax, even a “targeted” one, it just gets bigger and out of control, like a wildfire.
AMT was created in the late 1960s, specifically to cover 155 wealthy Americans who were using exemptions and loopholes to avoid paying any taxes. The AMT was needed to bring fairness to the tax code.
But Congress didn’t index AMT for inflation, and for almost 40 years the AMT bar has been going lower and lower. With each passing year, AMT will hit more and more working taxpayers, robbing them of legitimate tax deductions.
Very powerful tax-and-spend liberal AMT advocates in Washington for years have pushed to see this tax continue unabated. We conservatives have managed to fend off the AMT temporarily for decades, passing temporary “patches” numerous times. At intervals, we’ve passed patches delaying the AMT for one or more years at a time to shield middle class taxpayers for the time being.
In the 1990s, Congress did what was needed all along – repealed the AMT completely. But President Bill Clinton vetoed that bill. Since then, we’ve had to revert to patching the AMT annually, keeping it a step away from middle income taxpayers.
Why is this year different? Because the latest AMT patch is way overdue.
Until now Congress had never waited beyond May in any year to implement an AMT patch. Now we’re in December, and the U.S. Department of the Treasury and the IRS both have issued stern warnings to Congress about the pending implications of failing to pass a new AMT patch.
These agencies say if we fail to act on the AMT, many working Americans will face either new taxes or delayed refunds in April. A lot of people will be shocked to find that their next tax bill is so much greater and more complex than last year’s. At the same time, many Americans will be wondering where their long-anticipated refunds are.
“When it comes to patching the Alternative Minimum Tax, members of Congress are like a bunch of kids,” the Des Moines Register editorial board said. “They’ve been repeatedly warned about what will happen if they fail to act, but they don’t listen.”
That’s so true. This procrastination, this inattention to the American people and their wise counsel is one reason Congress’ approval rating is so low right now. Short of the political discipline needed to pass an outright AMT repeal, for 40 years we’ve at least kept the AMT at bay with band-aid approaches. Now we don’t even seem willing to apply the band-aid.
Though the Senate has overwhelmingly passed an AMT patch without conditions, the House has yet to act, and many liberal Members are still resisting.
In the end, I believe we’ll get another patch. No one in Washington – not even the most ardent tax-and-spend Member of Congress – really wants AMT to fully ignite and start scorching American pocketbooks like it could. That would trigger a severe and rightful rebuke from taxpayers.
Congress should have extinguished the AMT years ago. But short of that, the American people want us to keep protecting working taxpayers from this tax. Congress should stop acting like kids, foolishly ignoring experienced advice and playing with dangerous political fire. We should douse the AMT before it burns any more hard-working American taxpayers.
Senator Lott welcomes any questions or comments about this column.
Write to: U.S. Senator Trent Lott, 487 Russell Senate Office Building, Washington, D.C. 20510 (Attn: Press Office) or Email