Yesterday, I wrote a post that provided some background on the AMT and how it has grown dramatically from its very limited original purpose to where it is now on pace to burden over 25 million Americans this year. Now, the latest word on Capitol Hill is that the Democrat's are working on a proposal that would do as follows to the AMT:

• Exempt anyone from it making less than $250,000.
• Raise the AMT rate from 28% to 36% to anyone above the $250,000 earnings mark.
• Create a new tax bracket for millionaires with a possible rate of 40% or higher.
• Include capital gains and dividends as items covered by the AMT, which means the tax rate on capital gains and dividends would increase from the current rate of 15 percent to 36 percent or higher for people with incomes above $250,000.
• Provide an additional tax increase for companies moving off-shore to seek "tax havens."
• All of these tax increases do not completely make their AMT reform policy revenue neutral, so there will be further tax increases that are to be determined.

If enacted into law, this terrible proposal would be a tremendous barrier to the movement of capital and would likely have a negative effect on our nation's economic growth. I agree that we should fix the AMT, but let's fix it by reducing it, eliminating it, or changing it -- not simply moving the burden of paying it around.

More on an alternative proposal, I will be offering soon.

Several years ago, I was one evening standing on the steps of the Capitol with some members of Congress, when our attention was attracted by a great light over in Georgetown. It was evidently a large fire. We jumped into a hack and drove over as fast as we could. In spite of all that could be done, many houses were burned and many families made houseless, and besides, some of them had lost all but the clothes they had on. The weather was very cold, and when I saw so many children suffering, I felt that something ought to be done for them. The next morning a bill was introduced appropriating $20,000 for their relief. We put aside all other business and rushed it through as soon as it could be done.

"Mr. Speaker--I have as much respect for the memory of the deceased, and as much sympathy for the suffering of the living, if there be, as any man in this House, but we must not permit our respect for the dead or our sympathy for part of the living to lead us into an act of injustice to the balance of the living. I will not go into an argument to prove that Congress has not the power to appropriate this money as an act of charity. Every member on this floor knows it.

We have the right as individuals, to give away as much of our own money as we please in charity; but as members of Congress we have no right to appropriate a dollar of the public money. Some eloquent appeals have been made to us upon the ground that it is a debt due the deceased. Mr. Speaker, the deceased lived long after the close of the war; he was in office to the day of his death, and I ever heard that the government was in arrears to him.

"Every man in this House knows it is not a debt. We cannot without the grossest corruption, appropriate this money as the payment of a debt. We have not the semblance of authority to appropriate it as charity. Mr. Speaker, I have said we have the right to give as much money of our own as we please. I am the poorest man on this floor. I cannot vote for this bill, but I will give one week's pay to the object, and if every member of Congress will do the same, it will amount to more than the bill asks."

In 1993, the last time the Democrat's controlled the House, Senate, and Presidency, they raised the AMT rate from 24 percent to a dual rate structure of 26 and 28 percent, and on top of that, they failed to index the increases for inflation. As a result, 30 of the expected 31 million taxpayers (97 percent) will be forced to pay the AMT by 2016 because of the Dem's decision not to index the increase for inflation.
In 1999, under Republican control, Congress passed a bill to implement a phased repeal of the AMT by this year. It would have proactively ended the problems we are now experiencing. The measure, however, was met with zero support from Senate Democrat's, and a veto pen from President Clinton. If Clinton had not vetoed it, the AMT would be a non-issue today, eradicated for good. Instead, we stand here today looking down the barrel of this problem.

This evening, the Democrat's are bringing to the floor their conference report on the emergency war funding bill. As is now well known, the bills passed in the House and the Senate included over $20 billion in unrelated, non-emergency pork and special handouts. In the conference version, much of the same spending remains although some of the more notorious additions were removed like the $74 million for peanut storage and $25 million for shrimp farming.

The Democrats, as admitted by Rep. Charlie Rangel of New York, used much of this unrelated spending to buy votes for their "slow bleed" Iraq strategy. But they are also using it as a tool to spend as much of your money as they can without being subject to normal budgetary restrictions. Considering the Dem's campaign rhetoric to restore "fiscal responsibility" in Washington, I cannot help but call their actions for what they are in this case - hypocritical.

For example, the war funding bill includes $5.8 billion over eleven years in new entitlement spending without providing a way to pay for it. This means the bill should be subject to the Democrat's highly touted "fiscally responsible" pay-as-you-go rule. But what have they done? The Dem's simply waived the ability of Republicans like me to bring up a point of order and hold them to account. Hmmm. I guess they only stand by pay-go when politically beneficial.

This is class act hypocrisy. I hope the American people can see past the hollow rhetoric.

On the heels of the announcement this week, by the Social Security and Medicare Trustees, that entitlement spending continues to travel down a path to disaster, I wanted to bring to light some insightful quotes I heard delivered by Ben Bernanke, chairman of the Federal Reserve Board. He made them in February while testifying before my colleagues and I in the House Committee on the Budget. He understands that something must be done soon.  I hope the Democrat's will get the memo.

"...the United States has entered what is likely to be a long period of demographic transition, the result both of the reduction in fertility that followed the post-World War II baby boom and of ongoing increases in life expectancy...As a consequence of these demographic trends, the number of people of retirement age will grow relative both to the population as a whole and to the number of potential workers.

"An important element in ensuring that we leave behind a stronger economy than we inherited, as did virtually all previous generations in this country, will be to move, over time, toward fiscal policies that are sustainable, efficient and equitable across generations. Policies that promote private as well as public saving would also help us to leave a more productive economy to our children and grandchildren."

"In the end, the fundamental decision that the Congress, the administration, and the American people must confront is how large a share of the nation's economic resources to devote to federal government programs, including transfer programs such as Social Security, Medicare and Medicaid....Those members who favor a more expansive role of the government, including more generous benefits payments, must recognize the burden imposed by the additional taxes needed to pay for the higher spending, a burden that includes not only the resources transferred from the private sector but also any adverse economic incentives associated with higher tax rates."

"...because of demographic changes and rising medical costs, federal expenditures for entitlement programs are projected to rise sharply over the next few decades. Dealing with the resulting fiscal strains will pose difficult choices for the Congress, the administration and the American people. However, if early and meaningful action is not taken, the U.S. economy could be seriously weakened, with future generations bearing much of the cost."

For more info on the need for entitlement reform, check out this post.

Today, the House is going to vote on a bill making Washington, D.C.'s "delegate" into a full fledged voting member of the House. In order to continue the balance between Republicans and Democrats, this bill gives another seat to the State of Utah. Therefore, it would increase the size of the House by two to 437 members. Because the bill requires new funding for the two new members and corresponding staff, under the Pay-Go rules passed by the Democrat's last January, they have to find a way to pay for this increase.

Now, all the Democrats needed to do was find a relatively modest $2.5 million in wasteful spending in the budget and direct it towards these new expenses. But, what did they decide to do instead? Add accounting gimmicks and complexity to the tax code.

What they have done is offered into statute a policy that permits the IRS to take more taxes from taxpayers than they are supposed to, and then give it back at the end of the year. This way they are technically not enacting a tax increase; but, they are depriving those taxpayers of the bank interest or freedom they would have had to use that money. The essentially are "stealing" that money for twelve months and then saying "Thanks, I used it for what I wanted...you can have it back now." With this extra or "stolen" revenue the federal government is then able to collect enough interest to pay for this new expense.

Wow. This is a textbook example of the great lengths the Dem's are willing go to not even entertain the notion of spending accountability. In fact, the $2.5 million needed under the bill represents just .00014 percent of the budget. Come on...even the most ardent liberal would recognize that we could find that money in our $2.2 trillion budget. I guess the Democrat's would just rather steal from the taxpayer.

If they prefer tax gimmickry above a budget offset of .00014 percent, I don't even want to imagine what they will do with the explosion of entitlement programs, which are on course to consume 100 percent of the federal budget by 2040.

Small business employer's stated that they have to use these tax professionals to ensure they comply with our incredibly complex tax system.

On a related note, John Stossell reported today that in Estonia citizens need only about 10 or 15 minutes to file their income taxes. Why, you may ask? In 1992, Estonia became the first country to tax everyone at the same flat rate. Right now, their flat tax rate is at 22%, and in 2009, it will drop to 20%. To learn more and for a good read, click here.