Still busy

Somehow I've still not managed to catch up with all my work and free up time for a righteous blog rant (though I do have some topics in mind).

This past weekend I bottled my latest batch of beer (it's residing in the bath tub until I'm convinced that I'm not going to have exploding bottles) and I had to grade tests. Yesterday was a no class day (Presidents' Day), but we had professional development all day. Today I gave a stats test (this was a tough one, apparently) that will occupy my time for a couple of days. Maybe by Friday things will slow down.

In the meantime, here's a Sebastian Mallaby column on the "alternative minimum tax". Why am I linking to a column on the AMT? Well by this point in my life I've developed pretty settled opinions on many government policy issues. Sure a new issue may arise or circumstances may change so that I alter a firmly held opinion, but I tend to "believe what I believe" on most policy issues. Sebastian Mallaby, though, can make me consider changing my opinion.

See, the AMT was originally designed to punish a very few "fat cats" (fewer than 200 households according to some common estimates) back in the late 1960s who managed to get away with paying no, or almost no, income taxes. Essentially if you make over $X you figure an "alternative minimum" amount you owe. That way, even if the fat cats figure out how to be creative with deductions and such, they still pay at least this minimum amount. The problem with the AMT is that it was NEVER indexed to inflation! Thus the "fat cat" income level not applies to a majority of "professionals" and it's starting to hit teachers, contractors, etc. As nominal incomes rise with inflation over time, eventually even retail sales clerks will be computing and paying the AMT. It's a textbook example (literally) of how inflation can distort tax systems and I rail against it every semester in my "cost of inflation" lecture. Don't repeal it, but index it now! Mallaby, though, raises some interesting points.

First, unilaterally dumping the AMT precludes using it in a "tax trade". For example, "Let's scale back some of those 'permanent' tax cuts or the home interest deduction and, in exchange, we'll dump (or seriously modify) the AMT." I can recognize and appreciate that argument even without rethinking my underlying position on the AMT. It's point 2 that made me go, "Hmm..."

Second, Mallaby claims dumping the AMT would be a mistake. He correctly points out the administrative burden it imposes and he implicitly recognizes some of the "unfair" outcomes it generates, but he claims it's one of the few taxes that truly fulfills its "progressive promise" (my term):

For all its administrative clunkiness, the AMT is wonderfully progressive: 90 percent of its revenue comes from those earning more than $100,000 a year, according to the nonpartisan Tax Policy Center. Last week Baucus denounced the AMT as a "monster in the tax code" -- a "Frankenstein," no less. But in an era of rising inequality, you don't slay progressive monsters casually.

Now I'm not 100% convinced I'll be rushing to defend the AMT anytime soon, but I'm amazed that one newspaper column could get me to rethink this issue at such a basic level. Again, point #1 would be an easy sell, but #2 essentially requires me to do a 180 on a matter I thought was settled. I've said it before, but I'll say it again. Sebastian Mallaby is the best popular press public policy (how's that for alliteration?) writer in America today.