Middle Class, Schmiddle Class

Our own fierce anti-tax warrior Peter Roskam just met a tax cut he didn’t like. Kind of freaky until you understand whose taxes would be cut.

On Friday, November 9th, the House voted, pretty much along party lines, to pass H.R. 3996: Temporary Tax Relief Act of 2007. Peter Roskam and the Republicans voted against passage.

The purpose of the bill is to prevent 23 million middle class families from being subjected to the Alternative Minimum Tax. Tax law normally puts me right to sleep but here’s what I understand about this one. The AMT was introduced in 1969 and was designed to ensure that wealthy individuals and corporations who were escaping tax liability completely through the use of deductions and loopholes beforced to pay some tax: 26-28% for individuals, 20% for corporations. The problem is that the threshold for the AMT was not indexed to inflation, and now some not so wealthy people may become subject to the AMT, perhaps 20% of all taxpayers by 2010.

The Democrats, in introducing this bill, aimed to make the AMT back into what it was intended to be: a minimum tax for the wealthy. Democrats believe in progressive taxation, that is, that the very wealthy, whose fortunes are built on the labor of all of us, should have a greater tax responsibility in proportion to their greater resources.

Peter Roskam, who normally loves a tax cut, voted against this one because it wasn’t designed to help his wealthiest constituents, but rather to help ordinary folks like you and me. Peter believes in regressive taxation - taxes that fall most heavily on those of modest means, taxes that help the rich get richer and the rest of us get poorer.