In Blue Dog Betrayal, Senate Passes Tax-Free AMT

Harry Reid Blames Republicans for Tax Increase Failure

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The Senate abruptly reversed course last night and passed a one-year patch to the Alternative Minimum Tax without including any offsetting tax increases wanted by Blue Dog Democrats in the House. The bill passed overwhelmingly 88-5 with all Republicans voting for the measure. The move by the Senate represents another significant backtracking on a Democratic campaign season pledge. Democrats vowed to restore fiscal discipline to Washington by reinstituting pay-as-you-go budget rules that require all tax cuts to be “paid for” by corresponding tax increases or spending cuts.

Senate Majority Leader Harry Reid (D-Searchlight) feebly blamed Republicans for the failure to increase taxes. "We want everyone to know we have tried every alternative possible,” said Reid. Republicans were happy to take the blame, as Sen. John Thune gloated:

They had painted themselves into a corner. That's a huge concession on their part, completely repudiating one of their core principles.

Democrats in the House, most notably in the moderate Blue Dog caucus, were not happy.

Read on…

Rep. Mike Ross (D-AR) was livid. “We run for reelection every two years. They run every six years. Don't try to tell me the Senate can't take a tough vote," he said. Other Blue Dogs joined in the chorus of boos emanating from the House side of the Capitol. Rep. John Tanner (D-TN) put the Senate action in stark terms, saying, “If we waive paygo on this, it will open the door for more financial -- bordering on criminal -- irresponsibility."

Just two days ago, Blue Dog Democrats addressed a letter to Reid and House Speaker Nancy Pelosi, vowing to oppose any and all fixes to the AMT that did not include offsets.

We believe that waiving PAYGO, no matter the political pressure, is both fiscally reckless and an abdication of our duties. Under no circumstance will we vote for any piece of legislation that does not meet the requirements of PAYGO, nor will we vote to waive the PAYGO rules to allow for such legislation.

The Blue Dogs are very serious about their insistence on following the paygo rules. One leading Blue Dog, Florida Rep. Allen Boyd reportedly told the Washington Post that he would rather see the AMT balloon out of control than have the Democrats go back on their campaign pledge of enforcing fiscal discipline.

In truth, Democrats aren’t any more interested in fiscal responsibility than past Republican-led Congresses were. But their lust for power caused their leaders’ mouths to write checks that realities of governing can’t cash. Blue Dogs want tax increases every bit as much as more liberal Democrats. Their insistence on paygo rules is only a fig leaf intended to hide this fact from their conservative constituents.

Of course, Republicans will be very happy to sit back and let the Democrats’ ideals clash with reality. All of which bodes well for Republicans in the 2008 Congressional elections. Harry Reid has handed them a ready made and very effective campaign message to run in Blue Dog districts as well as nationally: No matter whether they call themselves liberal, moderate, conservative, or Blue Dogs, the only thing standing between Democrats and their plan to raise taxes, is the Republican Party.

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In Blue Dog Betrayal, Senate Passes Tax-Free AMT 17 Comments (0 topical, 17 editorial, 0 hidden) Post a comment »

I was not looking forward to getting hit by the so inappropriately named AMT.

The so called House Leadership already promised to accept whatever the Senate passed. The reason, they don't want 20 million Americans pissed at them for not doing something they could have easily done.

I'm shocked!!! I didn't think that was possible for a man of such leadership qualities, who has distinguished himself time and again, issue after issue, as being nothing more than a mindless liberal, unable to engage the White House intelligently on any issue. He might think to limit his exposure to the Senate press microphones; it's not helping his image.

That these "fiscal conservative Democrats" in the same breath as pay-go always default to tax increases.

Why can't someone in the media mention that pay-go (which itself is a terrible idea, especially when combined with the static revenue forecasting model used by CBO), does not require tax increases. None of the Blue Dogs mention that they could have worked out a bill that cut spending in order to offset the "cost" of tax relief. Why does tax relief for some have to come with tax increases for others (and actually, the person who sees AMT relief could wind up seeing some other tax bill go up anyway)?

Maybe we should stop calling them "fiscal conservatives" since they don't bother with anything that doesn't involve more money for Washington.

the absurdity of the notion that you need an offsetting tax increase to balance the elimination of unintended AMT tax consequences that everyone acknowldges should never have happened in the first place.

Is that the CBO forecasts still assume that the government should "expect" or be "entitled" to AMT money every year. For what must be at least a decade Congress patches the AMT annually. So the government hasn't seen any of this money for quite some time. Why does the CBO factor it in as an anticipated receipt at all? Why isn't it off-budget so that a failure to fix it would be a "windfall" (meaning that even under PAYGO it wouldn't require an "offset").

The best fix of course is to repeal it entirely. In the absence of that, why aren't we at least proposing a "long-term fix" that would kind of "retroactively" index the AMT to inflation. Take the original numbers passed in the 60s and tell the Treasury to update them as if they were indexed according to the CPI for each year since then. That would remove most of the need for these patches until we can get the thing revoked completely.

even the Bush administration has been complicit in the scam you describe, because it allows them to show projections with the budget deficit falling far more rapidly in future years than it presumably would if they project the reality of the ATM continuing to be patched every year.

I suspect the R's don't go out of their way to pass a long term fix because they enjoy the potential problems it creates for Congressional Democrats every year, forcing them to vote for the fix or beating them over the head with it.

I'd like to see the principled approach and someone actually try to get rid of it long term, but too much politcal hay to be made to realistically expect that.

Well said, in fact they could start with earmark reform.
This should cover the " cost " of AMT very nicely. Probably with change to spare.

Why our party allows these so called "consevative" democrats to survive is a mystery to me.

The voters in those districts have to be educated about what really happens when those hypocrites get to Washington, DC. They will always vote with their party when they are needed.

We need to run ads with pictures of Reid/Pelosi/Rangel/Frank in every one of those districts. Those "leaders" are what those voters are really getting.

Aside from it sounding like some banana republic, PAYGO is the child of people who can't do real economic math.

I am forced to recommend, in light of their inability to comprehend the economic multiplier of tax cuts, that these five lucky winners be designated "Paygonians." As more Dems continue to trumpet the cosmetic-at-best benefits of PAYGO, we may expand the term.

When all else fails, simply revel in the absurdity of it all.

Even the Socialist voted for this one.

The 5 against were:
Carper (D-DE)
Conrad (D-ND)
Dorgan (D-ND)
Feingold (D-WI)
Whitehouse (D-RI)

I hope that someone in ND will remind the voters there that Conrad and Dorgan are supposed to be, at the very least, "moderates." At least I don't really expect better from Carper, Feingold and Whitehouse.

The presidential candidates (Clinton, Obama, Biden, Dodd, McCain) plus Ensign and Voinovich were absent. Anybody interested in hearing HRC and Obama tell us how they would have voted?

What the hell good does the RNC do if it cannot coordinate disseminating those kinds of ads to key districts, as well as across the country to educate people what these morons are trying to do. It escapes me why the Dem's get a free pass on these stupid ideas, and never have to explain themselves or their intent. Wake up RNC, you have an arsenal of attack ads just waiting in the wings. Use them!!!!

In some of the races I was following last year, the Dem candidates were running to the RIGHT of their Republican opponents and pulling it off!

I would so be vindicated if Pelosi were a one termer.

If not fixing the AMT is a tax INCREASE, how is extending it a year a tax CUT? PAYGO includes replacing taxes that never existed?

Listening to a democrat talk requires the "willing suspension of comprehension of the english language".


==== 13 ====

The AMT is a currently existing tax. If everybody in Congress dropped dead and no legislation could be passed, the tax would exist, it would be payable, and many would owe it.

However, every year - including last year - Congress puts together a little fix that changes, just for that year, the rules of the Tax Code sections that implement AMT so that it applies to fewer people than the code language would (usually by adjusting the threshhold that it kicks in at, or the exemption levels that get taken off the top when calculating it). So, in Republican speak - and in the impact on the pocketbook - the failure to basically "do what we did last year" would mean that many people would pay higher taxes. Thus inaction is an increase.

In Democrat circles, the government is entitled to the AMT revenue as the Code is written, absent the "fixes" of prior years. And so, trying simply to put people in the same position they were in a year ago when filing their taxes for 2006 is a tax cut.

None of this would matter, though, if the Democrats didn't use stupid rules like PAYGO. Without PAYGO it wouldn't matter if it's a cut or an increase or neutral. WITH PAYGO, you wind up with the current scenario, where it's counted as a cut and thus needs to be offset.

I'd like to see all those Blue Dogs offer to give up their pet projects if they're so interested in getting this fix done.

Thats toooo baaadddd.

Can we get our refund checks on time or are you all going to mess that up too? Are you going to treat refund checks the same as emergency funding for the military? With this Congress approval ratings, I wouldn't put it past them as ones who would say to the people of America that they can eat cake while the American people readjust their finances until our popular Congress is ready to part with their money.
---snarkiness maximus---

I read elsewhere that the AMT tax accounts for 1.67% of the federal budget. Perhaps someone can suggest cutting spending by 1.67%, thus eliminating the "deficit". Or is this too much to ask?

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