Just A “tax Fix?”

Your part of the stimulus package that President Obama is signing today? Oh, that’s just a “tax fix.” In fact, “a $70 billion tax fix” that really shouldn’t have been included in the bill. 

So say the “liberals” and “Obama supporters” cited in Alec MacGillis’ Washington Post piece today (“After Stimulus Battle, Liberals Press Obama”).  Rahm Emanuel, too, but we’ll get to that later.

MacGillis writes (emphasis added): 

Obama supporters had envisioned big initiatives to rebuild schools, overhaul aging infrastructure and expand the safety net.

The bill includes just under $50 billion for roads, bridges, transit, and rail, less than many mayors and governors had hoped – though the White House did manage to slip in $8 billion for high-speed rail. It includes a $70 billion tax fix that will help upper-middle-class earners and have little stimulative effect – added at the request of Sen. Charles E. Grassley (R-Iowa), who voted against the bill anyway. The final deal dropped a $16 billion school construction fund in the House version, $11 billion to cover the unemployed in Medicaid, and billions in aid to states. 

Left unsaid, of course, is what that “tax fix” is.   It’s the “patch” to avoid throwing up to 26 million mostly middle-class taxpayers into the Alternative Minimum Tax (AMT), which would have added a crushing and often unpredictable Federal tax burden at a time of economic stress for middle-class families. 

Leave aside the mischaracterization of the AMT as benefiting the “upper middle class” – a characterization that most taxpayers earning $68,000 would find laughable – and focus on the reality here. The piece essentially concedes that the Obama Administration didn’t really want an AMT fix and would have been perfectly happy to have ignored it for now.

Don’t believe me? Think they would have cared about the middle class? Here’s MacGillis again (emphasis added): 

[White House Chief of Staff Rahm Emanuel] “argued that the package was smaller than what Obama envisioned, particularly if one does not count the $70 billion tax fix – which Emanuel called “the price for getting the deal done.” But he said the final deal was “90 percent” of what Obama wanted.

“We clearly thought that economic activity needed more, but it was more important to get it done than argue about just that,” he said. “At the end, it became a choice between passage or not.”

Assuming Emanuel’s statement is accurate, good for Senators Collins (R-ME), Snowe (R-ME), Specter (R-PA), and Nelson (D-NE) in apparently insisting on the AMT fix as part of the price of their votes. (I’m assuming that credit belongs to the Senate here because the House vote was so lopsided and partisan.)

As to “economic activity,” if someone takes a tax refund and purchases a car or home appliances, isn’t that stimulative? Or if someone avoids foreclosure on a home or increases personal savings, isn’t that a good in itself even if it’s not “stimulative?” 

So let’s be clear: Liberals think that an AMT fix is not “stimulative” (but apparently, a tax hike for these families would be). If they had their way, liberals would keep the AMT and use the revenue for government spending programs.  Your part is just a “tax fix” that shouldn’t have been in there anyway. (In their thinking, you probably won’t notice the AMT difference that much anyway after 2010, when they repeal the Bush tax cuts.)

All the more reason that Republicans need to push for permanent AMT repeal, now. We probably can’t save the Bush tax cuts. But we can make it politically painful for the Obama Administration to raise taxes on millions of middle-class taxpayers.