A Tax Backgrounder: The Bush Tax Time-Bomb

· dKo journal

Just a bit of a “backgrounder” on a looming Republican political crisis:
Even if the Democrats continue to fail to come up with a vision of their own, the key Bush tax cuts have always had built into them a “time-bomb,” which is bound to do heavy damage to the Republicans in congress. It is hard to see how more than a year or two can go by before the issue comes politically front and center.
In the Bush scheme, two competing priorities were “Left Till Later.” Later is getting to be be Now.
1. The key cuts for the wealthy were passed with short life spans. That allowed for headline numbers on ten- year budget projections that were relatively more digestible, because they could count these cuts as being in effect for only about five of the ten years.
2. The Alternative Minimum Tax, established years ago so that the wealthy, even if their tax favors would normally wipe out all their taxes, would have to pay at least a (differently calculated) Minimum Tax.
The level at which this kicks in was not “indexed” to rise with inflation. So each year it affects, in addition to the Wealthy, more and more of the Very-Well-to-Do.
It is indispensable to the Republicans that the Wealthy and the Very-Well-to-Do have common interests in their respective levels of privilege. But the total budget will not sustain both. So there is going to have to be a trade-off, a choice, a schism: Either make the key cuts “permanent” or raise the ever-declining–and broadening–level where the Minimum tax kicks in.
So now we get to see how this unfolds. I think it’s going to be fairly traumatic for the GOP.