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What Republicans won’t tell you about the tax cuts

The secret to Bush’s tax cuts is that the middle class will pay more taxes. There is a great article at Bloomberg.com today.  Here are a few excerpts:

Candidates Are Ignoring $1.35 Trillion Minimum Tax `Time Bomb’

By Ryan J. Donmoyer Oct. 31 (Bloomberg) — Congressional candidates this fall are furiously debating Iraq, Medicare and extending tax cuts. Most are staying quiet about an imminent legislative challenge: how to stop a tax increase that will hit more than 20 million households next year, some with incomes as low as $50,000.

Unless Congress acts, the alternative minimum tax will gradually impose $1.35 trillion in additional taxes over the next 10 years. Yet only six candidates in the 28 most-competitive House and Senate races across the country even mention it on their campaign Web sites.

Most candidates are avoiding the subject because the cost of stopping the tax increase would obstruct key elements of their agendas, such as the expansion of prescription-drug benefits for the elderly planned by Democrats, or Republicans’ plan to make permanent President George W. Bush’s 2001 and 2003 tax cuts.

Looks like no one wants to talk about this. Although, lets give the devil its due, the Democrats have addressed this issue. Not locally in the individual races because people don’t want to hear about tax increases. 

The minimum tax was created as a parallel tax system in 1969 to prevent 155 wealthy people from reducing their liability through excessive exemptions, credits, and other deductions. Because it wasn’t indexed for inflation, the tax increasingly affects people with modest incomes by denying deductions such as personal exemptions, property taxes, and medical expenses.

45 Million Households

The tax affected 3.8 million households this year; that number will grow almost six-fold in 2007. By 2016, about 45 million American households face higher bills if changes aren’t made, according to an estimate this month by the nonpartisan staff of the congressional Joint Committee on Taxation.

And what will happen if we don’t address this?

Rangel, who is in line to become chairman of the tax-writing Ways and Means Committee if Democrats win control of the House, has said fixing the minimum tax is Congress’s “responsibility.” Some of Bush’s tax cuts, especially those for investors and multimillion dollar estates, would have to be pared or abolished to pay for a permanent fix without worsening the budget deficit, he said.

“Clearly we’re going to have to raise the money within the system,” Rangel, 76, said in an interview last month.

Bush and other Republicans have responded that Rangel and other Democrats are planning tax increases if they take power.

`Taxes Are Going Up’ “If the tax cuts we pass are not made permanent and they are left to expire, your taxes are going up,” Bush said at an Oct. 26 fund-raiser for Republican House candidate Jeff Lamberti in Iowa.

 John Buckley, chief tax counsel for the Democratic staff of the House Ways and Means Committee, said the minimum tax reclaims many of the benefits provided by Bush’s tax cuts. That is because the tax cuts lowered rates under the normal system, without altering the alternative minimum tax rates. By law, taxpayers must calculate their liability under both systems and pay whichever is higher.

As a result, twice as many households will pay the minimum tax if Bush’s tax cuts are made permanent than if the cuts are allowed to expire.

More here

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October 31, 2006 - Posted by | Economy, Government Policies

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