The fiscal cliff is nearing, and Congress and President Obama are scrambling to come to some agreement over the pending tax hikes and spending cuts. The focus, of course, lies with the middle class, as our political leaders place all their efforts on courting middle-income voters. I guess the idea is that poor welfare queens don’t pay attention to the political system, and the wealthy are already used to getting crapped on.
One key question now being asked in the fiscal cliff debate, though buried under the public’s radar, is what will happen to the alternative minimum tax if we fall of the edge. CNBC explains:
Implemented in 1969 to make sure upper-income Americans pay their share of taxes, the AMT has increasingly snared more middle-income Americans over the years because it was never indexed for inflation.
During the 2011 tax year for example, the higher tax hit single taxpayers with incomes as low as $48,450 and joint filers making only $74,450.
But millions more Americans could be subject to the AMT in their 2012 returns if Congress fails to reach a deal on the fiscal cliff before year-end. That’s because the AMT is currently scheduled to hit individuals making as little as $33,750 a year and joint filers making $45,000.
While this is a concern, the political notion of focusing solely on the middle class is a populist approach by Democrats and the Obama administration that ignores the economic significance of tax hikes on the so-called wealthy.
The wealthy create jobs. Moreover, defining someone who earns $250,000 as wealthy, when they run a business — and a small business at that — is a facade. Running a business takes risk, and risk is what expands business operations and, in turn, generates jobs.
If Congress and the Executive want to curb the persistently high unemployment rate, they should brush up on their Econ 101.