Thursday, June 01, 2006

The AMT: pathway to the flat tax and Social Security reform

Writing in the WashPost, Robert Nelson lauds the simplicity and honesty of the alternative minimum tax. I’ll skip down to the conclusion:

The Social Security system is another area in which the AMT might facilitate radical change. Social Security taxes could be abolished and the flat tax adjusted upward to compensate for the lost revenue. The Social Security trust fund is largely an accounting fiction, and it is time to integrate the Social Security tax with the income tax system. Alternatively, Social Security tax payments could become a deductible credit from the required AMT payment.

Such major changes in tax law, and some needed refinements to the existing AMT, can be debated and discussed. Right now, the most important step is to keep Congress from ruining a good thing. If it can be persuaded to leave the AMT alone next year and in future years, Congress will continue progress toward a flat tax revolution that has been in the works for many years. Such a gradual process is probably the only way the United States will ever adopt such a major change. The AMT is a tax policy windfall that ought to be protected and preserved.
That’s an interesting twist on tax law: eliminate payroll taxes and lump them into a larger fixed flat tax. I think if Americans could grasp the total bite of these taxes, they might warm up to reform.

1 comment:

Anonymous said...

Too bad Congress has still not indexed AMT to inflation!