Why would the President, in this sluggish economic environment, add huge tax complications just for temporary items? Bowles-Simpson, published nearly a year ago, urged Congress to consider revisions to the tax code. Momentum for this proposal has gained considerable traction on both sides, and yet the Obama administration refuses to even consider it. Their idea of revising the tax code is tacking on millions of taxpayer dollars via tax credits to subsidize the pet issues of various voting blocs.
Equally disturbing is the fact that the Buffett rule, which Obama proposed, is merely another AMT. Congress plays the AMT card every year and most taxpayers are either 1) unaware of its existence, or 2) don’t understand what it is. Its stated purpose was to require that all taxpayers paid at least a fair share of tax. This was done by identifying loophole type deductions. There would then be an alternative calculation using lower tax rates applied against this taxable income as increased by the preferences.
However the AMT was seriously flawed from the outset. Instead of focusing on these loophole type preferences (which would have limited the tax to a very small number of tax law “abusers”), the law that was passed included items that were not loopholes at all. And it was then imbedded in an exemption structure which guaranteed that over time all taxpayers would be moved towards paying this tax.
We do not need another AMT targeting the wealthy via the Buffet Rule, simply because we do not have an inordinate amount of wealthy citizens paying less than their fair share. Although a small number of high earners may end up with a lower percentage than usual (say, 16% tax), it is never noted in the media that such earners have likely been taxed once already at the corporate level. But even if they have not, that percentage is still higher than most middle class taxpayers, who, with the deductions and tax credits, actually end up paying around 7% tax. And don’t forget the more than 40% who pay no income tax at all!
Obama resists tax reform simply because he is using the code as a lever to facilitate class warfare. He simutaneously adds new deductions and credits to entice those who are struggling financially to his side, while inflicting additional tax burdens on those who have enjoyed substantial monetary success to pay for his runaway spending.