Friday, May 07, 2004
Copyright © Las Vegas Review-Journal

EDITORIAL: The `alternative minimum tax'

Get rid of it

In the beginning, Congress enacted the income tax.

Then the lawyers and the lobbyists got busy, lobbying their favorite congressmen to amend the tax code with so many exemptions, deductions, schedules and loopholes that a man of moderate strength could now give himself a hernia trying to lift the thing.

But then all the congressmen began to wail, "Oh woe is us, we've thrown in so many exemptions, deductions, schedules and loopholes that some rich people are paying hardly any income tax at all!"

And that didn't suit the purpose of the income tax, of course. The purpose of the income tax is to drum up most of its revenue by taxing middle-class workers, while convincing them the real burden is being placed on those who have the effrontery to create, save and invest capital ("the rich,") thus accruing the wherewithal to build businesses and create jobs, an activity which it is the role of any progressive government to discourage and punish.

Thus was devised the "alternative minimum tax," which -- the workers were assured -- would stop those greedy rich folks from getting away with paying the same "low" percentage of their income as everyone else, through the devious device of the rich people scurrilously, you know ... obeying the law.

And now The Associated Press reports that the minimum tax was "designed to trap high-income tax evaders." Don't you love it? ("Tax evasion" is a crime. Why, pray tell, would a "tax evader" be any more likely to pay the alternative minimum tax than any other tax?)

At any rate, von Mises' law -- which observes that any government intervention will create unintended consequences, requiring another government intervention to fix the first one -- soon made itself felt. Thanks to inflation, the AMT ensnares more middle-income wage-earners each year. About 3 million taxpayers -- some of whom live in high-tax states or have numerous children -- paid the tax this year, The AP reports. (For those forced to pay it, the alternative minimum tax effectively takes back the tax cuts passed during the Bush administration.)

And next year, 9.2 million Americans -- some estimate as many as 12 million -- could be whacked by the AMT.

Meantime, even those who manage to avoid the AMT often have to run through a long and tedious series of calculations designed to determine the theoretical minimum tax -- a calculation in which many of the exemptions and deductions that taxpayers routinely use to lower their tax bill, don't apply.

So the House on Wednesday voted 333-89 to fix the problem -- temporarily -- by passing a bill designed to keep the 9.2 million American workers who would otherwise find themselves covered by the AMT next year from having to, um ... pay the alternative minimum tax.

The bill would slow the tax's creep into the middle class "by allowing taxpayers to exempt from the tax as much of their income next year as they can this year," The AP reports.

"While Congress is studying a long-term fix to correct the AMT problem, it is imperative that we act now and make certain that we do not increase the number of hardworking taxpayers who are subjected to the AMT," said Rep. Rob Simmons, R-Conn.

Thank heavens. Isn't it nice to know the Congress wants to tax only lazy, layabout taxpayers?

The White House joined in the celebration. "The administration urges Congress to act by the end of this year to extend AMT relief," the administration said.

Certainly, anything that keeps taxpayers from having to pay more tax is all to the good.

But here's an idea: Why not just get rid of the "alternative minimum tax" -- and all the deductions and exemptions which led to its creation, in the first place?

The IRS should be instructed to set a single tax rate, and require that the tax due be derived annually by multiplying subject income (as defined in clear language) by that percentage -- whereupon those who owe the tax would be required to file on a 4-by-5 postcard.