If there is such a thing as a Law of Unintended Consequences, the US Tax Code is full of them. Virtually every tax on the books is there for a purpose (I say virtually all, because with the size of the code, there have got to be accidental laws in there). The primary purpose of taxes, in general, is to raise revenue so the government can operate. Think of homeowner associate fees. The secondary purpose of many taxes it to influence behavior. For example, in order to encourage charitable giving, the government has made donations to qualified charities tax-deductible. In order to reduce consumption of alcohol and tobacco, there are additional "sin" taxes tacked on. There are also attempts to make the tax burden as fair as possible, while still funding the government. Of course, "Fair" is in the eye of the beholder...
The Alternative Minimum Tax (AMT) was an attempt to make things more fair. Outraged that a number of the wealthiest Americans weren't paying a penny of income tax in 1966, the federal government created a parallel tax system to catch the people who were overusing deductions. They made sure it would apply to only the wealthiest Americans. Of course, today, we all know what's happening to the AMT. It is applying to more and more Americans each year as inflation boosts the salaries of ordinary Americans into the 1966-wealthy range. One reason Bush was able to say his tax cuts over the past few years haven't had that much of an impact on tax revenue was because those extra deductions threw a lot of people into the AMT, which meant that they paid more tax anyway. Now a presidential tax panel has recommended eliminating the AMT altogether. It's just too much for the average American to deal with, they said. Scrap the thing and the only losers will be tax accountants. Hey, the government bureaucrats are on our side for once! Or are they? Clearly the AMT was never meant to apply to the estimated 21 million families it will hit in 2005. Most of those people pay taxes and have no weird tax-avoiding deductions other than state income tax or large families. But lets not forget the original purpose behind the AMT - as a band-aid over holes in the regular income tax that allowed the wealthiest Americans to pay less tax than the local schoolteacher or mechanic. Simply getting rid of the AMT will once again open the door for people who make hundreds of thousands of dollars a year to deduct 100% of their salaries. And then who will it fall on to make up the rest? The Treasury Department estimates that killing the AMT will cost $1.2 trillion (with a "T") over the next 10 years. Some of that was the hidden cost of the Bush tax cuts. And the rest is legitimate tax that will no longer be paid by the wealthy.
I'm not saying that Congress failed to fix the AMT in order to get the public support for scrapping it. But it's awfully convenient that the biggest winners will be the rich, while the upper middle class merely dodges the bullet. The AMT isn't the only convenient, "We're from the government and we're here to help you" issue today. I'm sure you've heard of the estate tax, which the Right has dubbed the "Death Tax". A better name would be the "Inheritance Tax", since it's absurd to suggest that you're being taxed for dying. Only the people inheriting money are taxed, and then only if you A) failed to plan correctly and B) left behind a large sum of money. The Estate Tax was designed to prevent dynasties. It's aimed at the super-rich, not to penalize them, but to encourage them to spend their money while they live, either by investing it or enjoying it. I won't argue the pros and cons of such an approach. I will say that again it had unintended consequences. After years of not keeping up with inflation, it became nearly impossible to pass down small family businesses whole. The Republican response has been to push to abolish the tax altogether. They've done an excellent job convincing a lot of Americans that the tax was going to financially ruin their children. The Truth is that the biggest beneficiaries are going to be the super-wealthy, which the upper-middle class dodges another bullet. The family farmer with $5 million worth of land but few liquid assets will be saved, but so will the $5 billion bequeathment from Bill Gates Senior to Junior.
For better or worse, the American public is being sold a bill of goods. They're being encouraged to choose a small gain today that will come with a large pain tomorrow. If abolishing the AMT and the Estate Tax is really in the middle-class's favor (as I'm sure our friends on the Right will vigorously argue), why not trust them with the truth. Why not tell them how much the people in charge stand to gain personally from these abolishments? Why not share with them where the extra $1.5 trillion will come from? Why not tell them that the reason they are in danger of being hit by taxes that were never meant for them is because Congress dropped the ball? What are they afraid of?