The voices of Tax Policy Center's researchers and staff
Treasury Secretary Hank Paulson said in a letter to congressional Republicans yesterday that Congress needs to act immediately to enact an Alternative Minimum Tax fix. One reason: It will take 12-13 weeks for the agency to reprogram its computers to account for the change.
Wasn’t the patch already built into last year’s tax returns? And while Congress will probably tinker a bit with a fix, the basic structure won’t change much. We all know about the IRS’s long-standing computer problems. But three-plus months?
Of course, this isn’t just about writing software. It is mostly part of an effort to force congressional Democrats to pass an AMT patch without paying for it. The idea: The quicker the bill moves, the less time Democrats will have to build a consensus for the needed revenue raisers, and the more likely it will be that the measure, which would lose roughly $50 billion in FY ’08, will go unpaid for. Good news for those private equity managers whose tax breaks on carried interest are in the pay-for bulls-eye.
The top GOP congressional tax writers who released Paulson’s letter reinforced the message with a press conference of their own. Filing season would be a “fiasco” if a temporary AMT fix is not passed immediately, said top Senate Finance Committee Republican Chuck Grassley (R-Iowa). And, in case, anybody missed the real point, senior Ways and Means Committee Republican Jim McCrery (R-La.) added, “This is not a new tax cut that should be paid for."
I guess he’s right about that. It is, however, a recurring tax cut that should be paid for.
Nearly everyone agrees that this kind of, um, Perils of Paulson, tax policy is awful. The AMT itself is a disaster. This business of Congress waiting until the last moment to enact another temporary patch is ridiculous. And it is unfair to the IRS, which must scramble nearly every year to catch up with Congress’ end-of-session tax tinkering.
Mostly, though, it is unfair to taxpayers. It isn’t so much the forms, since most AMT taxpayers use commercial software or go to a preparer. Instead, it is about the inability of people to know for most of the year whether they are going to be subject to the tax at all.
That’s why the AMT should be fixed, permanently and soon. Of course, this little
And, by the way, about that IRS software: Doesn’t Paulson have a 12-year old nephew who could help out?
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