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September 19, 2002

Attack of the AMT

When the GOP designed their tax plan last year, they used two tricks to balloon its costs beyond its stated sticker price. As most folks know, they set it to expire in ten years, meaning that its longer term costs were hidden. But they planned to campaign to make the cuts permanent. The other trick was knowledge that the Alternative Minimum Tax would increasingly snare upper middle class taxpayers, creating a constituency for modifying or repealing the AMT to further increase tax relief.

A new study by the Tax Policy Center, does the numbers and argues that up to 36 million people will lose out on part or all of the benefits of the 2001 tax cut in the next ten years, as they become covered by the Alternative Minimum Tax. Suggested reforms would cost the budget $440 to $950 billion over the next decade. See this press release, this brief on the issue and the fuller analysis.

So expect that while the GOP thinks a $500 billion prescription drug benefit is too much, they will no doubt push these further tax cuts, taking the 10-year tab for the 2001 tax plan to a cool $2 trillion.

Posted by Nathan at September 19, 2002 09:39 AM

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