Democrats may "redirect" the Bush tax cuts

Ways and Means Committee Chair Charles Rangel has generally rejected the idea of repealing the "Bush tax cuts" of 2001 and 2003. On the other hand, he doesn't want to make them permanent, either. This Tax Notes Today ($) item suggests that the new operative verb for the Democrats may be "redirect." They don't want to increase overall levels of taxation, but they do want to excuse more of the middle class from tax liabilities, "redirecting" tax relief from the high to the middle income levels. Specifically, they may increase taxes on "the rich" to try to address the monstrous mess that the Alternative Minimum Tax has become. Says New York's senior Senator Charles Schumer, "We have had tax cut after tax cut after tax cut for the very wealthy. Instead, we want to redirect tax cuts to the middle class."

This is the usual politcized tax nonsense, of course. The "Bush tax cuts" included the creation of a 10% rate bracket and other features aimed at the lower end of the income spectrum that have resulted in a tremendous increase in progressivity in federal income tax collections, with an increasing share of the payments coming from the highest earners. What's more, the positive economic effects of the 2001 and 2003 tax reforms have been downplayed or ignored by the Democrats, and, more surprisingly, by the press.

But the Republicans really aren't much better. We routinely read that the reason the AMT is hitting more and more taxpayers is that was never indexed for inflation, as if that was some silly oversight during a long-gone Congress. The truth is more far complicated, and perhaps a bit ugly. Because large a portion of the Bush tax cuts were aimed at the middle class, large numbers of families had their tax burden brought down below the AMT threshold. And this was not accidental, the phenomenon was explicitly taken into account in scoring the tax cuts. So there really has been a significant upper middle class population segment that hasn't had much benefit from these tax changes.

Why would the Republicans be deliberately duplicitous? Could it be that the majority of AMT collections come from the blue states, with their higher state and local tax burdens?