Following up on our earlier discussion of tax policy, there was an article in the December 10th edition of Newsweek discussing how 13 million tax refunds may be delayed.
The disagreement in Congress comes over the alternative minimum tax, “which raises taxes on people with high deductions relative to their incomes.” Because the tax hasn’t been altered to compensate for inflation, it would affect 2/3 of taxpayers with income between $100,000 and $200,000, not just those in the over $200,000 bracket.
Congress has not arrived at a decision about how to cap the alternative minimum tax, and if anything is changed, the article cites logistical problems (revising already-printed tax forms and reprogramming computers) that would delay the filing process.
If the alternative minimum tax is capped for 2007, it will cost $50 billion over the next decade. Where is that money coming from? The article says,
“Democrats want to fill that gap by raising taxes on certain superhigh-income people whose compensation is taxed at low rates. Republicans want to add the $50 billion to the deficit, and they have the votes to block the bill.”
This situation provides a good scenario to evaluate how different political parties approach fiscal policy.
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