Today the House of Representatives is to vote on a short-term fix to the Alternative Minimum Tax, the system set up in 1969 to capture revenue from millionaires who had succeeded in paying no tax at all. We all know what happened with that: the AMT was never indexed to inflation, and now more and more middle Americans find themselves paying it. (The standard statistic is that without action, 23 million taxpayers will fall prey to the AMT next April.) The bill proposed by House Ways and Means Chairman Charlie Rangel (New York) would, among other things, suspend the AMT next year and next year only while legislators hammer out a permanent solution.
Republicans, though, will vote against Rangel's bill, and they lay the blame at those "other things:" to make up for the lost revenue, Rangel would raises the taxes on carried interest earned by hedge fund and private equity managers from the capital gains rate to the ordinary income rate. But could there exist a different reason for Republicans to vote against the bill? In a commentary on the public radio program Marketplace, Washington Post columnist Jeff Birnbaum articulated an additional (if not ulterior) motive. "The people who'd be hit hardest [by the AMT], it turns out, live in blue states. California, for instance, would have 1.7 million more AMT payers this year. New York would have a million more. New Jersey would have 750,000 more and Massachusetts would have 500,000," said Birnbaum. "Red states don't tend have as many people looking at an AMT tax increase as blue states do."