Trouble in Paradise: "Red States" on repealing the Alternative Minimum Tax

[Bush_Eats_Beef]

Posted on Mon, Aug. 15, 2005

AMT repeal would hurt red states

BY PETER A. BROWN

The Orlando Sentinel

http://www.fortwayne.com/mld/newssentinel/news/editorial/12387506.htm

Those of us who live in what the politicians in Washington, D.C., call the red states ought to think twice when we hear them talk of repealing the Alternative Minimum Tax. That's because those folks want to put one over on us by repealing a levy we in the red states pay less frequently, with the likelihood of replacing it with one that would cost us more. This bizarre reality stems from the AMT being the only tax that discriminates based on geography among those with similar incomes. There's also a political twist. Republicans generally want to cut taxes, while Democrats are more skeptical because they want more government spending. But on this one, the situation is much more complex because of how the tax falls.

Every state that voted for President Bush in 2004 would be net losers if the AMT is repealed and another sales or income-based tax were created to capture that revenue. Those in most states that voted for John Kerry would be net gainers. That's why when you hear the politicians in D.C. talking about making the tax system more fair, make sure you ask them: Fairer for whom?

Think of the AMT as an alternative, and higher, federal income tax. It has different rules for deductions and credits than the one most of us live under. The deduction for a state income tax makes the most difference in creating this geographically uneven playing field.

This issue boils down to the philosophical question of whether the relatively wealthy who choose to live where fiscal discipline is more a part of the political culture should subsidize their counterparts in states where it is not. Seen that way, the AMT doesn't seem all that bad.