Today the Washington Post published an op-ed that claimed that the AMT (Alternative Minimum Tax) is a good thing and should not be scrapped (even though, since it's not adjusted for inflation, it's become more and more of an unfair burden on middle class workers, while the upper class continues to see tax cut after tax cut). His justification is based on his support for a flat income tax, and his belief that the AMT is effectively becoming such a tax.
I'm no economics or tax policy expert but this just comes across as a blatant piece of right-wing propaganda posing as reasoned argument, due to what I view as gross distortions in the piece--something that the Post has been publishing in its op-ed pages (and elsewhere) with seemingly greater frequency lately (we all know about Howell, Hiatt and Hoagland by now, of course).
I'm hoping that someone with an economics or tax background can tell me if I'm overreacting here, or if this is in fact back-door flat tax propaganda.
Here's an excerpt:
An Accidental Tax Boon
By Robert H. Nelson
Thursday, June 1, 2006
Sometimes in Washington, good things are more likely to happen by accident than by congressional or executive design. Treasury secretary nominee Henry M. Paulson Jr. is no doubt aware of this fact, but it's one worth keeping in mind in the continuing debate over tax reform, which is sure to command a good deal of the new secretary's attention. I'm thinking of one program in particular: the alternative minimum tax, or AMT.
The AMT is viewed by many as a bad thing. Yet, consider this: There is wide agreement among economists on the benefits of a federal "flat tax" on income that would apply a uniform rate to every taxpayer and eliminate most current deductions and tax credits. A flat tax would get rid of a large number of economic distortions resulting from the many tax "subsidies" that often benefit narrow interest groups. This is tax "pork," and Congress is as addicted to it as to the ordinary spending kind.
In places around the world, including Eastern Europe, governments creating new tax systems have been turning to a flat tax to avoid this sort of thing. What does this have to do with the AMT? Just this: As Post business reporter Albert B. Crenshaw has noted, the AMT "approaches a modern-day flat tax." It imposes a uniform rate of 26 percent up to $175,000 in income, and above that 28 percent.
...
If the present AMT rates were applied as a universal flat tax -- and especially if the AMT exemption were reduced and certain remaining AMT exclusions eliminated -- the resulting federal revenue might even come to exceed current expenditure levels. The solution would then be to reduce the flat tax rate (the AMT rate) so that revenue and expenditures were brought back into balance.
...
The Social Security system is another area in which the AMT might facilitate radical change. Social Security taxes could be abolished and the flat tax adjusted upward to compensate for the lost revenue. The Social Security trust fund is largely an accounting fiction, and it is time to integrate the Social Security tax with the income tax system. Alternatively, Social Security tax payments could become a deductible credit from the required AMT payment.
Such major changes in tax law, and some needed refinements to the existing AMT, can be debated and discussed. Right now, the most important step is to keep Congress from ruining a good thing. If it can be persuaded to leave the AMT alone next year and in future years, Congress will continue progress toward a flat tax revolution that has been in the works for many years. Such a gradual process is probably the only way the United States will ever adopt such a major change. The AMT is a tax policy windfall that ought to be protected and preserved.
The writer is an economist and professor in the School of Public Policy of the University of Maryland.
Am I misunderstanding something here, or is this back-door right-wing propaganda? Somehow I'm not convinced that there's a "wide agreement among economists on the benefits of a federal "flat tax" on income", unless they all work for the Cato Institute and AEI.
And perhaps the reason that Eastern European countries have adopted a flat income tax is because they don't have much of a middle or upper class (aside from organized crime bosses and corrupt politicians and businessmen who obviously have other ways of evading taxes).