There have been several big legislative changes and proposals from D.C’s lawmakers over the past week. On June 30th, Washington D.C’s legislative council voted to allow several tax cuts to take effect in September ahead...
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Burman and Hassett Tell It Like It Is on AMT Before Finance Committee
Yesterday, the Senate Finance Committee held hearings on what to do about the growing Alternative Minimum Tax. Throughout the hearing, the two economists on the panel, Kevin Hassett of the American Enterprise Institute and Len Burman of the Tax Policy Center, echoed each other's statements regarding the fact that the best fix for AMT is a fundamental tax reform package that includes broadening the base while keeping rates as low as possible to raise the given revenue needed to run the government. Here's a summary from Congressional Quarterly:
Another temporary patch to blunt the effect of the alternative minimum tax is a "given" this year, Senate Finance Chairman Max Baucus said today, signalling trouble for a House attempt to repeal the parallel tax system.
During a hearing, Baucus, D-Mont., asked witnesses for their best ideas to pay for the patch, which could cost $50 billion for one year and more than double that for two years.
"We've got to find ways that are realistic here, not that are unrealistic," Baucus said. That caveat could preclude some of the ideas panelists put forward, such as curtailing the mortgage interest deduction, limiting the state and local tax deduction, and imposing a 4 percent surtax on adjusted gross income for couples earning more than $200,000 per year and individuals earning more than $100,000.
Unfortunately, many of the tax facts that Hassett and Burman stated weren't too popular on the Hill with some members, such as the fact that the mortgage interest deduction is bad tax policy and that the state and local tax deduction mostly favors higher-income taxpayers and should be limited. Burman even suggested that the mortgage interest deduction can actually make it more difficult for lower- and middle-income Americans to purchase a house. But speaking ill of such a sacred cow is almost heresy in Washington as many of the members on both sides of the aisle responded (incorrectly) to Burman asserting that the mortgage interest deduction is very important in promoting home ownership.
Yesterday's hearing makes it pretty clear that the principle of having a fundamental tax reform that broadens tax bases is supported by experts on both the left and the right. The main hurdle is that members of Congress need to stop believing the messaging put out there on tax policy from special interest groups and instead listen to those who are explaining tax policy in a truthful manner like Burman and Hassett.
To view the video of the hearing, click here.
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