Notes for the coming tax fight

Tax Notes today confirms JLM's obervations below on the attention that will be paid, in September, finally, to the expiring Bush tax cuts.

I notice that no one wants to talk about the actual issues.  Everyone likes to focus on the few added points to the top tax bracket, and really, that's inconsequential.  The key points are:

• If the Bush tax cuts expire, those in the lowest brackets will see tax increases of 100% and more--because they pay very little right now.  In the middle-income brackets, we're talking 50% tax increases.  This is a meaningful amount of pain.

• The most important tax factor for stimulating the private economy is treatment of capital income and capital gains.  Will dividends get a 100%+ tax hike?  What about capital gains?

• What will happen to the AMT?  It ought to be abolished, it does not affect those in the highest tax brackets, the ostensible target.  Congress has kept it around because every year the urgent need to patch the AMT for inflation gives them cover for other tax hikes to "pay" for it.

• Will the estate tax be brought into the argument?  Proponents of the estate tax can't seem to figure out why there isn't more popular support for it.  The rich are already on board--Gates, Buffett et al.  Why not everyone? Because most people are beneficiaries, they are not yet rich, but they still hope to be.

• How much longer will hedge fund managers get to pay 15% on most of their income, on carried interests?  Much longer, is my prediction.  I'm seeing lots of technical attacks on the current proposal to treat carried interests as ordinary income, citing various flaws and using "solution as bad as the problem" rhetoric, even in places that typically advocate for higher taxes.

• You want more fairness? Then drop the deduction for state taxes--that's a purely personal expense. I'd drop the mortgage interest deduction, too, but that's the last thing the housing industry needs right now.  But these things are unlikely to even be on the table.

I had overlooked the most startling thing in JLM's post--M. Anderson wrote "September Song"! Is that our M. Anderson?  No, it was Maxwell, not Merrill.