Daniel Gross writes:
The Republicans' main argument against Democrats is that they'll raise taxes by letting the Bush tax cuts expire in 2010. Fix the AMT now and it will simply allow Republicans to argue that the Democrats are raising taxes in 2007 and 2008, too. What's more, fixing the AMT permanently provides all the drawbacks of responsible tax cutting with none of the benefits. The point of fixing the AMT is to shield millions of Americans from future tax increases. But Americans, who are instant-gratification addicts, would sooner vote for somebody who cuts taxes by $1,000 today than for someone who spares them a tax hike of $2,000 tomorrow.
Would Democrats suffer political backlash? Probably not. The AMT's victims will be concentrated in states in which Republicans are not likely to be all that competitive in 2008. In the home of Bushenfreude, middle-class and well-off voters already tend to blame Bush and his Republican associates for everything that has gone wrong. And well they should, given the GOP's shocking fiscal irresponsibility under Bush. It would be easy to fault them for the AMT crisis, too.
When the crisis peaks, Democrats can offer their alternative: fix the AMT, which would then be hitting millions of middle-class voters by rolling back the Bush tax cuts on the very rich. That's a political argument they will win. What they shouldn't do is try to repair the AMT problem too soon, before the catastrophe next April. Fixing it before taxpayers feel the sting would be better fiscal policy—but lousy politics.
That's a plausible read. What worries me, though, is that rolling back the Bush tax cuts to do nothing save replace portions of the AMT is a revenue neutral strategy. Democrats need to actually raise revenues for things like health care -- and part of that may mean restoring the tax cuts under the rationale of channeling that cash towards universal coverage, as John Edwards is promising.
That said, Gross makes some good points on the politics of taxes. Waiting till next year, with the expiration of the Bush tax cuts and the roaring return of the AMT will allow for quite a bit of energy behind tax reform. That moment should be used not simply to fix the AMT, or to roll back the Bush tax cuts, but to actually reform the tax code, as needs to happen every couple of decades when the numbers of deductions and quirks and loopholes and cheats becomes too unwieldy. A more flexible, fair, and progressive structure would be good for the country's fiscal situation and good for progressive priorities into the future.
