Washington Matters


AMT Push Undercuts GOP's Stand on Stimulus


Republicans seem quite pleased with themselves for coming together to oppose the stimulus, confident that it won't work fast enough for their opposition to lead to any recrimination from voters. They were all over the airwaves this weekend declaring their almost united stand has given them a political boost. Rep. Eric Cantor of Virginia, the second-ranking Republican in the House, told The Washington Post:  "What transpired... and will give us a shot in the arm going forward is that we are standing on principle and just saying no." 

But what the GOP did on the AMT undercuts any claim that Republicans are acting on principle.

Almost everyone agrees that the AMT, the alternative minimum tax, is an anachronism. It was created decades ago to prevent the rich from using deductions to avoid income taxes, but because its income and deductions limits weren't regularly updated, it would now snare millions of middle class earners and give them a big tax hike. So every year for the past several years, Congress has passed a temporary fix to prevent that, avoiding a permanent fix because that would be so expensive. Each year, there's a fight -- not on whether to patch it but on whether to pay for it with offsetting measures, with many Democrats insisting the fix be paid for  and Republicans objecting. Why? Because Republicans, by and large, are not the fiscal and balanced budget hawks they once were and claim to be, but tax-cutters first and foremost. Coping with the consequences comes later.

The House-passed stimulus bill didn't include an AMT fix. Everyone knew that would come later in the year, with the more conservative Democrats winning a promise from President Obama that it would be paid for. That was a worry to Republicans who insisted on adding it to the stimulus when the bill reached the Senate. Obama gave in to win GOP votes, although the prime architects, including Sen. Chuck Grassley of Iowa, the ranking Republican on the Finance Committee, still won't back the stimulus plan. 

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The AMT fix has no stimulative value. It won't have any effect for at least a year and everyone knows it will get fixed before then anyway. The only reason it's in the stimulus is to avoid paying for it. This clearly puts the lie to any Republican claim that they want a stimulus that is limited in scope and only contains measures that will create jobs, act quickly and won't add unnecessarily to future deficits. The AMT fix fits none of those goals yet it is destined to be part of a final bill. And it will make the stimulus look a lot bigger than it really is, allowing the GOP to criticize the plan as bloated.

All of which serves the Republican goal of applying fiscal restraint to Democratic spending ideas, but never to tax cuts.

 




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