Bush's Secret Tax Hike

Everyone knows the AMT is incredibly unfair. So why won't the president and Congress fix it?

By Daniel Gross
Posted Thursday, April 13, 2006, at 11:55 AM ET

This tax season is shaping up as a banner one for the federal government. The strong stock markets have produced a gusher of capital gains taxes. Corporations are continuing to reap massive profits, and so they're paying more in corporate income taxes. Lehman Brothers economist Drew Matus told Barron's that he expects "a 17 percent jump in tax receipts this season (not including regular withholding), and just a 5 percent increase in refunds." The upshot: Tax-season payments could be $59 billion higher than last year.

Should these projections materialize, Republicans will trumpet them as a validation of the supply-side tax-cutting mania. Just reduce taxes on capital and high-earning individuals, and tax revenues will magically leaven. But in fact, the rising revenues may prove exactly the opposite, Democratic point: If you raise taxes on people who make a lot of money, you'll end up with more tax revenues. In addition to windfalls from capital gains and corporate taxes, Matus noted that rising receipts attributable to the Alternative Minimum Tax are filling Washington's coffers. "My suspicion is the AMT has captured a large amount of the tax cut for upper-income earners," he told Barron's. In other words, tax receipts are up in part because many of the rich are paying higher taxes.