Defending the Alternative Minimum Tax.

Policy made plain.
Oct. 20 2007 7:05 AM

A Viable Alternative

Defending the tax the GOP wants to kill.

(Continued from Page 1)

In the six years ending last January, when they controlled both Congress and the White House, Republicans could have made government as lean as they wished, and no one could have stopped them. They didn't. It used to be that when they proposed irresponsible or fantasmagoric tax cuts, Republicans at least went through the motions of coming up with some theory about how it would all be paid for.

Supply-side economics—tax cuts would pay for themselves by generating new economic activity—often played this role. It made no sense, but it honored the tradition that you at least give the voters the material they need to fool themselves. It was the tribute that demagoguery pays to mathematics. Now, they don't even bother.

The problem with present arrangements isn't the AMT. It's Bush's tax cut for the affluent. For example, Citizens for Tax Justice (a left-wing group, but one whose analyses are rarely challenged by neutral experts) figures that the most startling element of that tax cut—the reduction of tax rates on both dividends and capital gains to a maximum of 15 percent—reduced tax revenues by $91 billion in one year (2005). Three-quarters of that benefit went to taxpayers—the top 0.6 percent—who reported incomes of more than $500,000. The AMT prevents the federal deficit from being even higher than it is. And although it no longer strikes only the very tippy-top incomes, it still is fairly progressive: Even in 2010, when the AMT will hit 20 percent of taxpayers if it isn't changed, more than half of AMT revenue will come from taxpayers reporting incomes higher than $200,000.


Actually, if you were designing the tax system from scratch, you might come up with something that looks a lot like the AMT. It resembles the "flat tax" of many reformers' dreams: a high basic exemption, so that low-income people don't pay it at all; very few deductions, credits, or exclusions; and (because of that) a much lower top rate than the current system: 26 percent compared with almost 40 percent. What makes it complicated is having to figure your taxes twice to see if it applies to you. Of the two parallel tax systems we now have—the regular income tax and the Altermantive Minimum Tax—it might make more sense to scrap the regular one and keep the AMT.

The tax code goes through generational cycles. The last big reform was 1986, when loopholes, deductions, and credits were eliminated and rates were cut dramatically. People remember this as a triumph of Ronald Reagan. But in fact, that reform emerged out of popular anger at the discovery that Reagan's earlier tax cuts had allowed many rich individuals and corporations to pay little or no tax. That is exactly the same anger that led to the creation of the AMT in 1969. And again today, many people, especially Republicans, say they want a simpler tax system with low rates and no loopholes. But one person's loophole is another person's important social policy—or, in fact, the same person's important social policy. As soon as we get that simpler system, people will start cluttering it up again: lower rates for capital gains, to encourage investment; the charitable deduction, to encourage private philanthropy; a bigger exemption for dependents, to encourage "family values" (you got a problem with this, buddy?). But all that's OK—in 20 years we can sweep out the clutter and start all over again.


Sports Nut

Grandmaster Clash

One of the most amazing feats in chess history just happened, and no one noticed.

The Extraordinary Amicus Brief That Attempts to Explain the Wu-Tang Clan to the Supreme Court Justices

Amazon Is Officially a Gadget Company. Here Are Its Six New Devices.

How Much Should You Loathe NFL Commissioner Roger Goodell?

Here are the facts.

Amazon Is Officially a Gadget Company


The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.


How to Order Chinese Food

First, stop thinking of it as “Chinese food.”

Scotland Is Inspiring Secessionists Across America

You Shouldn’t Spank Anyone but Your Consensual Sex Partner

Sept. 17 2014 5:10 PM The Most Awkward Scenario in Which a Man Can Hold a Door for a Woman
  News & Politics
Sept. 18 2014 10:42 AM Scalia’s Liberal Streak The conservative justice’s most brilliant—and surprisingly progressive—moments on the bench.
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
Sept. 18 2014 11:25 AM Gays on TV: From National Freakout to Modern Family Fun
  Double X
The XX Factor
Sept. 18 2014 11:40 AM Where Pregnant Women Aren't Allowed to Work After 36 Weeks  
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
Brow Beat
Sept. 18 2014 11:48 AM Watch the Hilarious First Sketch From Season 4 of Key & Peele
Future Tense
Sept. 18 2014 10:07 AM “The Day It All Ended” A short story from Hieroglyph, a new science fiction anthology.
  Health & Science
Bad Astronomy
Sept. 18 2014 7:30 AM Red and Green Ghosts Haunt the Stormy Night
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.