KUDLOW: Senator, is there any way that you can personally get me out of the AMT? I got nailed this year. I didn't know it was coming?Both halves of what Grassley says here are true. In fact, absent Congressional action, 23 million Americans will owe the AMT in 2007. And, because Congress has added many of the same loopholes to the AMT that originally plagued the regular income tax, the AMT is less good at backing up the regular tax than it used to be.
Sen. GRASSLEY: Yeah, I need seven more votes in the United States Senate. Because on the budget resolution, I had an amendment to do away with the alternative minimum tax, and I got 44 votes. So get me seven more votes, and we'll get rid of the AMT for everybody because, you see, what's wrong with the AMT, it was only supposed to hit very wealthy people in 1969. It
wasn't indexed. It's going to hit 23 million people this year. And we're counting on income coming in that was never supposed to be collected in the first place. And we even reached a point where very wealthy people have found ways around the alternative minimum tax. I'm surprised you haven't. But anyway...
KUDLOW: I did my best.
Sen. GRASSLEY: OK.
But it doesn't follow that outright repeal is the only solution-- or even the best solution. As CTJ has demonstrated, repealing just one of the AMT loopholes-- the special AMT tax break for capital gains income-- could almost singlehandedly pay for increasing the AMT exemptions in a "tax swap" that would restore the AMT to its original purpose of ensuring that truly wealthy taxpayers should pay at least a minimal amount of income tax.
A sensible discussion of AMT reform options is arguably too much to expect from Kudlow's program. But is it too much to expect from Senator Grassley?