Paygo and Harry Reid

The towering leader of the US Senate showed again why his colleagues elected him Majority Leader. The Senate has been wrestling with trying to fix the Alternative Minimum Tax which is a creation of 1960s tax policy and forces an increasing number of taxpayers to ignore legitimate deductions and pay a higher level of tax. The AMT was created in that era when the Assistant Secretary for Tax touted a report that thousands of "rich" taxpayers were not paying their fair share. The provision has held on even though there are tons of studies that suggest that no one ever consistently escapes the tax man (Benjamin Franklin was right about the only certainty being death and taxes!). But as many outdated policies based on bad statistics have a tendency to do the AMT is taking an increasing bite out of taxpayers who are far from wealthy.

When the Democrats took over in 2006 they promised fiscal responsibility and so reinforced some rules that are called "paygo" (if you want to reduce revenues you have to find offsetting revenues). But the AMT is a big magilla for the dems. There are an increasing number of taxpayers who are getting snared. Yesterday, the Senate adopted a solution for the AMT which ignores paygo. Reid, commented on his failure to follow the rules his majority adopted by saying "We want everyone to know we have tried every alternative possible," - uh, OK Harry,so much for leadership.

Don't get me wrong. Paygo is a good idea only if the where gets and the where gones are comparable. AND the AMT is silly tax policy. And, the House is likely to reduce the giddiness that the Senate introduced into the process (their last "good" idea was to pay for a partial reduction in the AMT by taxing "rich" wall street bankers - especially hedge fund managers).