Robert Nelson argues that the AMT is like a flat tax and then argues this makes the AMT a good thing. Since I’m late to this party, let me simply summarize a few good reactions starting with Kevin Drum:
As Nelson surely knows, there’s wide agreement among economists that a broadly-based tax that minimizes exemptions and loopholes would be economically efficient. However, there is no agreement at all that having a flat rate is a good thing. It’s wildly dishonest to say otherwise.
Mark Thoma notes that we Democrats might support getting rid of the subsidies that favor the rich and that any efficiency gains from a flat tax are being grossly exaggerated by Mr. Nelson.
So all I might have hoped to add was to comment on Nelson’s spin about Social Security, but then DeanSpeaks so we listen:
One of the disadvantages of having a public Social Security system is that people are free to make all sorts of untrue statements about it without facing any consequences. For example, an oped in the Washington Post this morning described the Social Security trust fund as “largely an accounting fiction.” This statement is of course absurd. The trust fund consists of U.S. government bonds, which the government is obligated to repay under the law. There is no sense whatsoever in which it can accurately be described as fictional.
I’m reduced to go after the obvious – NRO’s Jerry Bowyer who does not know the difference between income flows and wealth creation (ah, Jerry – savings is the portion of income we don’t consume) and confounds nominal with real changes. He also makes odd statements such as:
Even when adjusted downward somewhat for inflation, this aggregate jump in GDP is extremely large. The only larger spikes in modern time came during the bubble years at the end of the Clinton administration and the 2002-05 time period.
I guess he is referring to the 5.3% annualized growth rate for the first quarter of 2006, which was less than the 6.2% growth rate for 1997QII, the 6.7% growth rate for 1996QII, the 5.5% growth rate for 1993QIV, and the 5.4% growth rate for 1988QIV, etc. But OK, Ronald Reagan’s term as President must have been during the feudal era.
But the oddest oped I’ve seen today comes from an attack on Senator Schumer by Phil Kerpen:
For the sake of the American economy, and their own political fortunes, Democrats should disregard Schumer’s fiscal shortsightedness … According to the most recent data compiled by the Organization for Economic Cooperation and Development, the average wage earner in the U.S. in 2005 earned about $27,000 and paid a total effective tax rate, including federal, state, and local taxes, of 30 percent. Americans are not under-taxed. Yet Democrats like Schumer would do nothing to stop the largest tax hike in American history, which is scheduled to occur over the next five years. They would prefer to hike taxes even sooner … It’s the American people, not the pro-tax Democrats, who have the facts on their side.
The fact that Mr. Kerpen ignores is the elephant in the room – the massive Federal deficit which means Americans are already facing growing deferred tax liabilities. Democrats like Senator Schumer simply want policymakers to convert deferred taxation into current taxation, that is, to stop the explosion in Federal debt. We are not proposing to put this tax burden on the average wage earners – but many Republicans would. The problem is that these Republican politicians and the hacks that support them – such as those who write for the National Review – simply don’t have the integrity to say so.
Update: James Joyner adds to the debate over the AMT as a substitute for a flat tax:
First, no Republican that I know of advocates a flat tax in the 26-28 percent range; most talk about one between 10 to 15 percent. For the federal government to take over a quarter of one’s income off the top, with no deductions, is confiscatory. Second, one can simultaneoulsy [simultaneously] think a policy a good idea and oppose doing it covertly. The AMT’s critics find it outrageous that we set up a system encouraging people to make certain economic decisions–buying a house, making charitable donations, investing in education, an so forth–and then have a backdoor trap wherein those benefits are stripped after the money has been spent … So, the lure isn’t so much a flat tax but a massive tax hike. And the worst kind, at that: One ena[c]ted by the vagaries of inflation rather than by the direct action of the elected representatives of the people.
And yes – I left off Joyner’s feed the beast last sentence. This Democrat wants to see a tax increase and restraint on Federal spending.