-- Not surprisingly, three-fifths of taxpayers believe their taxes are too high; only two percent think they are too low. About a third of taxpayers would support a reduction in government services in order to achieve further tax cuts; just eight percent favor bigger government financed with higher taxes.
-- Support for fundamental tax reform is high; four-fifths of taxpayers believe that the tax system is too complex; just three percent believe the tax system is fine the way it is. By better than a 2 to 1 margin, taxpayers would be willing to give up major tax deductions, such as that for mortgage interest or state and local taxes, in order to get lower income tax rates.
-- Almost all taxpayers think that the top federal income tax rate of 35 percent is too high. More than 90 percent of taxpayers believe that the top rate should be no higher than 29 percent, with 70 percent saying that 19 percent should be the maximum.
-- The Alternative Minimum Tax is a rapidly growing federal tax. Originally designed to tax only the rich, increasingly it is a tax on the middle class. In 2005, the AMT affected only 1.3 percent of those with incomes between $50,000 and $100,000. Unless Congress acts, this percent will rise to 42.8 percent this year and over 50 percent next year. This illustrates the problem with all soak-the-rich tax proposals—eventually they end up taxing the middle class, too.
For years, Republicans have largely ignored the problem of the AMT—enacting temporary patches to the tax cut to keep the problem from getting worse, but not even attempting to offer a permanent fix. The latest patch expired at the end of last year, which is why there is such a sharp rise in the percentage of taxpayers affected by the AMT projected.
Consequently, Democrats really have a gun to the heads—they must do something on the AMT by the end of the year. But because they have pledged to pay for all tax cuts, they must therefore raise taxes somehow to pay for an AMT fix. Republicans aren't likely to offer much help in that area, making tax policy in 2007 an interesting spectator sport.
Bruce Bartlett is a former senior fellow with the National Center for Policy Analysis of Dallas, Texas. Bartlett is a prolific author, having published over 900 articles in national publications, and prominent magazines and published four books, including Reaganomics: Supply-Side Economics in Action.
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