But before lawmakers lure middle-class families into the welfare system, they should contemplate the absurdity at work here. Most of these families pay at least some federal tax. The IRS even considers some of them "rich."
That's right. In 2004, approximately 40,000 households earning $75,000 or less in the states with the most generous SCHIP coverage paid the odious Alternative Minimum Tax (an out-of-control provision enacted in 1969 to require 155 millionaires to pay at least some federal tax, but that now shakes down some three million taxpayers). The $66.6 million in AMT payments these taxpayers have forked over to Uncle Sam could have gone toward private health coverage for their children.
Repeal the AMT
Some of these AMT victims undoubtedly enroll their children in SCHIP. This certainly gives new meaning to the phrase "poor little rich kid."
The solution? Repeal the AMT. After all, Congress never intended it to generate so much revenue or ensnare so many taxpayers. The resulting tax relief (about $13 billion), moreover, would permit these hyperventilating governors to propose their own tax increases and dedicate the resulting revenue to their grandiose schemes. In California, AMT repeal would return $2.9 billion to Gov. Schwarzenegger's constituents. In New York, the relief would exceed $2.1 billion. In New Jersey, $842 million. In Maryland, $360 million. And so on.
If a massive expansion of the government's role is such a good idea, the governors should stop their pathetic bended-knee appeals to Washington for more cash and assert their prerogatives under our federalist system. Let them propose to increase taxes on their own constituents. Of course, Washington can help by cutting taxes and allowing their constituents to keep more of their hard-earned dollars.
If this provokes taxpayers to rebel, fine. These governors would then be motivated to seek out more targeted and cheaper solutions to an admittedly serious policy concern. But that's how our federalist system is supposed to work.