And not just at the state level. Vermont Rep. Peter Welch recently voted in favor of a bill that would protect 43,000 middle class Vermonters from being hit with a large federal income tax hike due to the Alternative Minimum Tax (AMT). The AMT is a very good example of the unintended consequences of legislation, or, as I like to think of it, sometimes, when you aim high, you end up shooting yourself in the foot.
Congress passed the AMT in 1969 after public outrage to "do something" when an investigation revealed that a small number of millionaires paid no federal income taxes. The solution: pass a law to guarantee that wealthy taxpayers had to pay a minimum amount of taxes. The result was a very complicated tax law change. One major problem was that the law's income threshold was not indexed for inflation.
The bill Rep. Welch voted for is in itself an example of what is wrong with the massively complicated tax laws of the United States (how can it not be complicated when it runs to 45,000 pages?). Tax laws should be designed to raise the revenues needed to fund government programs in a simple, understandable, fair, and non discriminatory way and should not encourage taxpayers to change their behavior simply to avoid taxes. Of course, that's the theory. The reality is much, much messier.
Here are some of the things the new bill will do:
It extends tax credits for hiring workers on Indian reservations (but not, I assume, Indians if they don't live on reservations).
It extends tax credits for railroad track maintenance. (What about airports? Do they get a tax break?)
It gives tax breaks for restaurant improvements (I'm not sure if you can supersize that part of the bill).
It gives tax breaks to motorsports entertainment complexes (I assume that's to get some NASCAR votes).
It gives tax breaks to firms investing in American Samoa (for those of you who are Doonesbury fans, this may be the doing of Uncle Duke).
It gives tax breaks for some taxpayers to exclude "from gross income for up to $2 million of the income attributable to discharges of home mortgage indebtedness incurred after January 1, 2007." (So much for progressive tax laws that help low income Americans struggling to put food on the table.)
And my personal favorite:
Amends the Tariff Act of 1930 to provide that wine of the same color shall be deemed to be commercially interchangeable for purposes of the duty drawback for unused merchandise.
I don't usually choose my wine by color, but who knows, if this bill passes the Senate, I might just do that. Then again, I first will probably need to know what a duty drawback for unused merchandise is.
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