Amidst the current, highly contentious debates over national healthcare policy, it is often easy to forget that the House and Senate are more than battlefields for the competing interests and ideologies of the two main parties. Contentious issues and vicious assaults have become the expected norm in today’s hyper-partisan environment, a phenomenon which the media is only too happy to fuel with continued coverage of the grueling and not-altogether enlightened legislative process, all of which is sold via a focus on the most grueling and not-altogether enlightened elements of the legislative process. This approach makes a certain sort of sense from a news perspective – one never hears about the cars that don’t blow up, after all – but in an environment where blown-up cars are the norm, it may be more newsworthy to occasionally treat the instances of bipartisan cooperation as major legislative landmarks.
Fortunately, such a major landmark recently appeared in the United States House of Representatives. On Tuesday, Aviation News reported that “The House Ways and Means Committee is scheduled to consider a proposal Wednesday that would extend alternative minimum tax (AMT) relief for airports for another year… Since the Recovery Act was enacted into law, airports have sold approximately $10 billion in bonds, and almost $8 billion of that amount benefited from the AMT provisions in the Recovery Act. Temporarily providing AMT relief has already saved airports approximately $635 million in reduced financing costs and allowed airports to invest in additional infrastructure projects and create jobs.” The bill passed the next day.
To be sure, the choice of targets for this particular instance of tax relief is arguably arbitrary. Airports seem hardly the most afflicted industries in the country, and it is unclear why targeting them, rather than extending AMT relief across the board to everyone currently suffering from the ill effects of a demonstrably bracket, creep-enhancing policy. However strange the legislative strategy may be, though, the existence of such legislation is an encouraging sign that the power of AMT reform as an empirically testable route to economic recovery has been validated. That is, the legislature may begin by targeting airports, but due to the seemingly random nature of the target, it is only a matter of time before somebody asks, “If it works for airports, why wouldn’t it work for any other industry/person?”
Objections could be raised – for instance, it is not clear that the slow and incremental approach currently being favored will arrive at the desirable universal conclusion that the AMT is an economic non-starter in time to prevent it from doing further damage to the economy. And there is no doubt that it will do further damage. Fox News reports that “Unless Congress passes another fix, the sharply higher Alternative Minimum Tax will snare millions of middle-class taxpayers, instead of the uber-wealthy it was originally designed to target. And that doesn’t even count proposed tax increases in relation to health care reform or climate change legislation. As the incentives to work, save, and invest are all decreased via increased marginal tax rates, economic growth is sure to suffer.” Not only is this bad for the country; it is bad for California’s economy specifically, given that much of the California economy is built either on tourism or entertainment – both industries which require a healthy and not-overtaxed middle class.
Another objection that could be raised to the notion that the AMT’s reform is a necessary progression from incremental reliefs is that Washington has an incentive to ignore the problems of the AMT because of its revenue raising capacities. The Washington Post reports: “Although almost everyone denounces it, the AMT is a big moneymaker for Uncle Sam, collecting more than $22 billion from four million taxpayers for 2008 alone. Congress has not found a replacement for this lucrative revenue raiser.” Especially given the phenomenally expensive bills currently under consideration, this objection holds weight, and so the prospects of AMT reform may be directly tied to the ability of reform advocates to provide alternative mechanisms to raise equivalent revenue.
This is a mission which Americans generally, and Californians specifically, cannot afford to avoid.