Mother of all tax hikes
You knew when Charlie Rangle was named the chairman of the House Ways and Means Committee that Tax hikes were just a matter of time.
Responding to months of speculation in tax land, House Ways and Means Chairman Charles B. Rangel (D-N.Y.) said Wednesday he’ll introduce two separate tax bills – a one-year patch of the alternative minimum tax and his infamous “mother of all tax reforms.”
Rangel said he may introduce both as early as next week. “We must do a stop-gap to make certain we don’t hold things hostage while we wait for the big bill,” he said. “I can’t leave the tax payers not knowing.”
The temporary stop-gap bill will spare as many as 24 million Americans, including some with middle-class incomes, from the alternative minimum tax. Current House pay-go rules say that the $65 billion bill must be offset with tax increases and other types of revenue raisers.
“We’ll pay for it with great difficulty,” said Rangel, refusing to suggest any specific measures. “It’s going to be politically painful.”
If these tax hikes become law it is likely the result will be reduced economic growth possibly even a recession. The more the Government takes in taxes the less that is available for capital investment… This capital investment is what fuels the strongest economy on the planet… well strongest for now anyway.
At a minimum we are looking at a $65 Billion tax increase this year… and well over a Trillion in future years as Rangle tries to replace revenues from the Alternative Minimum Tax.
Interestingly enough the The AMT was intended to target 155 high-income households that had been eligible for so many tax benefits that they owed little or no income tax under the tax code of the time. The conclusion of a 2004 Congressional Budget Office Brief on the AMT states:
Over the coming decade, a growing number of taxpayers will become liable for the AMT. In 2010, if nothing is changed, one in five taxpayers will have AMT liability and nearly every married taxpayer with income between $100,000 and $500,000 will owe the alternative tax. Rather than affecting only high-income taxpayers who would otherwise pay no tax, the AMT has extended its reach to many upper-middle-income households.
The AMT has gone well beyond its stated purpose of preventing extremely high income households from paying little or no tax to soon encompassing 20% of all taxpayers. Rangle’s Tax Reform begins with the presumption that he must replace the revenues from a tax that was never intended for government coffers to begin with.
Until Congress can demonstrate a little spending restraint, and until the President can exercise that Veto Pen a little more often, a Tax Hike is the last thing that should be considered.