Déjà Vu All Over Again: The AMT ‘Patch’ Is Back

Stephen Keen / June 25, 2008

It’s that time of year again. Congress is facing its annual AMT predicament, and once again Americans must suffer through the same worn out debate thanks to House Democrats.

The Alternative Minimum Tax (AMT) is a classic example of a broken Congress. The AMT, created in 1969 to prevent the wealthiest 155 Americans from avoiding taxes completely, was never indexed to inflation and now inadvertently impacts millions of Americans each year. Oddly enough, eliminating this tax is one policy Democrats and Republicans actually agree on. But elimination is not in the cards just now, and so the Congress turns to a “patch,” essentially an increase in the exemption amount, to prevent the number of affected Americans from soaring.

The patch has been extended repeatedly in recent years, but House Democrats are again insisting on fighting old battles and remain steadfast in their belief that in the name of faux fiscal discipline they can only avoid a tax increase on one group by raising taxes elsewhere.

If this debate sounds eerily familiar, you’d be right. Congress addressed the issue a mere six months ago, and passed a “clean” bill with 157 House Democrats voting for patching the AMT with no tax increases. With so many important issues facing the country at this time, why are House Democrats insisting on fighting yesterday’s trumped up battles while ignoring real issues?

Paying for new spending or actual tax relief is inherent in pay-go rules. But the idea of paying to avoid a tax increase is another matter entirely, and a silly one at that. Yet when it comes to passing the patch, even Senate Finance Chairman Max Baucus (D-Mont.) said recently, “Quite frankly, we all know it’s not going to be paid for, so why go through all the motions?”

Congress should admit that AMT reform is clearly a recurring issue and pass a patch through 2010, when major tax legislation is set to be reconsidered. All parties agree that at some point the AMT will be repealed, but until our congressmen can quit squabbling and work on real reform, they should spare us from this annual charade. The House should pass the patch through 2010, and follow the Senate’s lead by skipping the annual charade that the only way to avoid a tax increase is to increase taxes.