For years, Democrats and some Republicans have argued that a substantial portion of today's mammoth debt of $16.3 trillion should be pinned on the Bush-tax cuts of 2001 and 2003. Yet in January of this year, these same policymakers made 95 percent of these cuts permanent. The proponents of this action contend that it will bring fairness to the tax code and reduce the budget deficit. It fails miserably on both counts.
First, the tax rate hikes on those making more than $400,000 will only reduce the federal debt by less than 8 percent over the next decade. Second, the Obama administration argued that the higher rate on the "rich" would insure they pay their "fair share." White House communications director Dan Pfeiffer reported in a tweet that the tax would "act as a kind of AMT." Let's hope not!
In 1969 the Minimum Tax was passed to be rebranded in 1982 as the Alternative Minimum Tax (AMT). The original goal was to hook 155 high-income households that paid no federal income taxes. Currently more than half of AMT tax collections come from taxpayers making between $150,000 and $200,000 and it is estimated that by 2015 over 50 million Americans will pay the AMT. Unfortunately, millionaires continue to thwart the original intent of the AMT and will likewise sidestep the Obama tax hike with the burden falling on thousandaires some time in the near future.
Furthermore, despite adding tax loopholes in the recently passed tax bill for Hollywood moviemakers, NASCAR track owners and Puerto Rican rum producers, President Obama is now calling for the elimination of certain tax deductions for high-income individuals. Only tax preparers at H&R Block can appreciate the onerous tax code that the administration continues to litter with subsidies and tax favors for preferred groups.