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"The mother of all tax reforms"

October 30, 2007 - by Donny Shaw

Democrats have an extensive new tax bill in Congress that would make wide ranging adjustments with the intent of restoring “equity and fairness” to the tax code. The Tax Reduction and Reform Act of 2007 is revenue neutral, which means that all of its tax cuts would be paid for by equal increases elsewhere and vice versa. It’s a grand redistribution designed to shift more of the tax burden onto the wealthy.

The biggest adjustment would come from rolling back the alternative minimum tax (AMT), which was introduced in 1970 to ensure that the richest 155 households didn’t use loopholes to avoid paying taxes, but, since it is not indexed to inflation, now targets many middle and upper-middle-income households. The AMT rollback would be paid for by a 4 to 4.6 percent surtax on households with an adjusted gross income (AGI) of above $200,000. According to the Tax Policy Center, a joint program of the Urban Institute and Brookings Institution that helped shape the legislation, households with an AGI between $75,000 and $500,000, would gain more from the AMT rollback than they would lose because of the surtax and other offsets that would also affect them.

“Like the president, we all agree that taxpayers know best what to do with their money, and not the government,” Charlie Rangel (pictured, bow tie), the bill’s sponsor, said in a news conference to unveil his bill. “The difference that we have with the president is we don’t believe you have to be rich in order to know what to do with your money.”

There are many more important parts to this bill (eliminating the carried interest loophole, reducing corporate tax rates, expanding the earned income tax credit, etc.) and Dana Chasin of OMBWatch lays them all out in his succinct summary of the bill.

Also, the OpenCongress bill page has links to a lot of excellent news and blog coverage. You can follow the links to read in more detail about some of the bill’s particular tax reforms as well as find out why Republicans have renamed it “the mother of all tax hikes.” This bill represents an essential difference between Democrats and Republicans’ political and economic philosophies, and with the 2008 elections coming up, it’s going to be deconstructed by both parties. Better take a look for yourself to see what’s in it before you’re stuck wading through all the rhetoric.

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