Stealth Tax Increase Hits Millions

The alternative minimum tax (AMT) will raise taxes for millions of Americans in the next several years. AMT was created in 1969 to prevent the very rich from using loopholes to avoid paying taxes. But inflation has brought more US families into the net and this year 2.9 million families will pay an average of $6,000 more than they would owe under normal calculations, Edmund Andrews reported in the 4/10/05 New York Times. If the law remains unchanged, the alternative minimum tax is expected to wring an extra $33.9 billion from 18 million households in 2006. In 2010, it will rake in an additional $100 billion, and by 2015 an extra $200 billion.

Robert Kuttner of Prospect.org wrote 4/7/05 that within five years, 37% of people earning between $50,000 and $75,000 and 73% of those with incomes between $75,000 and $100,000 will pay the AMT, compared with less than 3% three years ago. Nearly all families earning over $100,000 will pay it, according to a Brookings Institution study. Fixing the AMT's creeping tax hike would cost $1 tln over the next decade.

The AMT reduces the value of the most common middle-class tax deductions, such as the ones for property taxes, state income taxes, medical care and child exemptions, Kuttner wrote. Adding insult to injury, it leaves intact some of the complex tax shelters used by the wealthiest.

George W. Bush has promised to fix the AMT as part an overhaul of the tax code, and he has ordered a bipartisan advisory panel to come up with recommendations by the end of July. But the Times noted that White House officials are counting on the extra money regardless of what happens to the alternative tax. Under the president's instructions, the panel's recommendations must be "revenue neutral," so that any cuts in the AMT would have to be offset by higher taxes someplace else.

Bush's allies in Congress are also talking about soaking the same upper-middle-class families to pay for the Bush program to partly privatize Social Security, Kuttner noted. At present, earnings subject to Social Security taxes are capped at $90,000. Sen. Lindsey Graham, R-S.C., wants to lift the cap so moderately affluent taxpayers pay more payroll taxes. "Reforming the regressive payroll tax is long overdue," Kuttner wrote. "It would make sense to add an exemption at the bottom and lift the cap [to give lower-income workers a break]. But Graham's approach, which adds no exemption for the middle class, is bad policy as well as needless policy. Were it not for Bush's proposed raid on Social Security, higher payroll taxes would not be necessary at all."

Chris Bowers at MyDD.com noted 4/11/05 that a recent NBC poll showed Dems might gain ground on the tax issue, as 54% of respondents said the federal income tax was unfair and 55% said it should have higher rates for people with higher income while 39% called for a flat tax with no deductions. Corporations pay less than their fair share, according to 54%.

Bowers also noted that four different polls in the first week of April showed Bush's approval in the 40s, ranging from 48% in a Gallup poll 4/2/05 to 44% in an AP poll 4/6/05.

Michael Tomasky noted at Prospect.org 4/11/05 that a Gallup-CNN-USA Today poll found 50% of American adults now believe that the Bush administration "deliberately misled" them about reasons for the war in Iraq. Another recent poll found 53% said the war wasn't worth the costs. With Bush's approval at the lowest of any president at this point in his second term, "Bush is objectively and without question one of the most unpopular presidents of the last 80 years." Yet the top agenda-setting journalists continue to call him a "popular wartime president." And that perception causes them to pull their punches. Tomasky noted that NPR's Linda Wertheimer told a Harvard audience in 2003 that because Bush's approval rating was above 60%, it was tough for the media to do its job and place itself out of step with public opinion (even though, as Tomaskey noted, Bill Clinton's approval rating of 60-plus throughout 1998 didn't stop the press from flaying him over the Monica Lewinsky scandal).

AIR AMERICA RADIO STILL CLIMBING: Congratulations to Air America Radio, which narrowly survived a rocky launch and marked its anniversary on the air 3/31/05. The network, which featured Al Franken, Randi Rhodes, Janeane Garofalo and Sam Seder, among others, added Jerry Springer in the mornings as well as several new stations to start its second year. An HBO documentary, Left of the Dial, followed the harrowing early months of the fledgling network, when cash-flow problems nearly brought it down in the first month on-air. But the talent and staff braved late paychecks, loss of health insurance and the defection of stations in Chicago and Los Angeles before the ratings eventually showed Air America nipping at the heels, if not overtaking, the supposedly invincible right-wing blowhards who dominated corporate radio. Recent Arbitron ratings showed it reaching more than 2 mln listeners a week, with 129,000 tuning in the average quarter hour. At press time AAR is on 53 stations, including 15 of the top 20 markets (back in L.A., but still not in Chicago), compared with 600 for Rush. Get more details and hear programs online at airamericaradio.com.

DeLAY'S DWINDLING DEFENSES: With allegations of financial and political misconduct coming fast and furious at Tom DeLay, it's no wonder he's gotten himself a few good lawyers. But with so many legal fires to put out, the House Majority Leader's bills have been piling up -- while donors to his legal defense fund are drying up. The Dallas Morning News reported 4/8/05 that the Tom DeLay Legal Expense Trust only received $50,000 so far this year -- significantly less than the $430,000 it took in during the second half of last year, before DeLay put his foot in his mouth over the Terri Schiavo affair. The Center for American Progress also drew attention to five corporations that gave thousands of dollars to DeLay's defense fund between its inception in 2000 and December 2004: American Airlines, Bacardi USA, Nissan USA, RJ Reynolds, and Verizon. "Consumers shouldn't have to facilitate Tom DeLay's unethical behavior with their purchases," Laura Nichols of the Center for American Progress, told the Morning News. "We demand that these companies ask for their money back and drop their support of Tom DeLay." Bacardi is one of several companies indicted along with two of DeLay's top associates for funneling illegal corporate contributions into DeLay's Texans for a Republican Majority PAC in 2002, but the company still saw fit to make a $3,000 donation to DeLay's defense fund. Contributions to the fund from corporations and current House members have each accounted for a third of DeLay's fund since it was created, according to Public Citizen. (Salon.com)

Rep. Chris Shays, R-Conn., became the first Republican House member to call for DeLay to quit as majority leader, but Shays was "dissembling" 4/9/05 when he told a Greenwich townhall meeting, "With all due respect, I can be accused of a lot of things, but supporting Tom DeLay is not one of them." Not only did Shays vote for DeLay as majority leader, but MyDD.com noted when the House Ethics Committee formally rebuked DeLay for the second time in six days, in October 2004, Shays came to his defense, saying, "I think he's been a great majority leader."

Among those hoping that DeLay keeps up the fight are Democrats who hope to run against him in 2006 regardless of the district they occupy and Lou Dubose and Jan Reid, whose The Hammer: Tom DeLay, God, Money and the Rise of the Republican Congress [Public Affairs, 2004] is still the best source for the goods on the corrupt Congress leader (at least as long as District Attorney Ronnie Earle of Austin isn't talking).

AMERICAN PAY CUT: For the first time in 14 years, the American workforce has in effect gotten an across-the-board pay cut, the Los Angeles Times reported 4/11/05. Corporate profits are high, as the economy last year grew 4%, more than the 3% historical average. But companies didn't pass along those profits with increased salaries. As a result, in the first two months of 2004, the growth in American wages fell behind the growth in inflation. Compounding the problem, while salaries remain flat, high housing costs, rising health insurance premiums and skyrocketing energy prices have all taken their toll on the finances of American workers, especially the working poor. The squeeze is especially intense on the 47% of the workforce whose employers don't directly provide their health insurance. For lower-income workers, who are more likely to be uninsured, the falling value of their wages is even more serious because they're more likely to live paycheck to paycheck. And rising food and energy prices take a proportionately higher toll on the poor than on the rich. (AmercanProgressAction.org)

BIZ SHIES FROM W'S SOCIAL SECURITY PLAN: The Bush administration is having a hard time getting US corporations to join its assault on Social Security. While business associations convey support to the White House, and funnel money to the Social Security privatization campaign, Kevin Drum notes 4/11/05 at WashingtonMonthly.com, the Los Angeles Times survey of the 20 largest US corporations found only two willing to publicly support the president's plan. Corporate CEOs apparently think healthcare costs and the deficit are more critical issues than Social Security. What's more, it turns out that investment banks don't really care much about the potential trading profits from private accounts. At the same time, none of these corporations want to be viewed as taking sides on a political issue, especially one this unpopular, and they're also feeling pressure from union pension funds.

CONGRESS ABANDONS MIDDLE CLASS: Democrats supported middle-class interests while Republicans supported corporate interests last year, a legislative scorecard of congressional votes found. In 2004, 90% of GOP senators and 99% of GOP House members earned failing grades for their votes on middle-class economic issues, according to the scorecard released 4/11/05 by the non-partisan Drum Major Institute for Public Policy (DMI). In contrast, 98% of Democratic senators and 100% of Democratic House members got passing grades and nearly half of the Democrats in House (49%) and Senate (47%) earned an "A" grade for supporting the middle class 90% or more. (See full scorecard at drummajorinstitute.org).

The DMI scorecard, "Middle Class 2004: How Congress Voted," scored votes on 14 measures affecting the middle class (families earning between $25,000 and $100,000). "Members of Congress repeatedly promise to support policy that will strengthen and expand the middle class," said Andrea Batista Schlesinger, DMI's executive director. "But our scorecard shows that Congress chose to prioritize corporate tax cuts and ideologically-driven legislation over addressing the concerns of middle-class families struggling with debt and the skyrocketing costs of health care and education."

Among the scored measures were proposals to increase Pell Grants to help aid keep pace with the rise in college tuition; proposals to protect overtime compensation by halting recent changes by the Department of Labor; the Pension Funding Equity Act which helped to stabilize faltering pension plans; the amendment restoring for Medicaid and Earned Income Tax Credit programs; the Pay-As-You-Go Tax Cut Amendment, which would have restrained new spending and tax cuts that drive up the deficit; the Alternative Minimum Tax Reform Amendment, which failed in the House and would have exempt middle-class families from a the Alternative Minimum Tax that was never intended to apply to them; and a bankruptcy bill that passed both chambers of Congress in 2004 but didn't emerge from conference committee. The Senate in March passed a similar bill, which is pending in the House.

CAFTA HURTS US FARMERS: Despite support by Agriculture Secretary Mike Johanns, the Central America Free Trade Agreement (CAFTA), which would expand the NAFTA model to Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua, would hurt the livelihoods of American family farmers and ranchers, National Farmers Union President Dave Frederickson said 4/11/05. He responded to Johanns' assertions that CAFTA will increase export opportunities for farmers. "We've heard these promises of prosperity of trade agreements in the past," said Frederickson. "For a variety of reasons they never seem to come true. I do not see what makes this one any different. CAFTA resembles failed trade policies of the past that further encourage a 'race to the bottom' for producer prices."

The agreement fails to address major issues that distort fair trade, such as labor, environmental regulations and currency, Frederickson added. NFU supports trade that benefits agricultural producers in all countries, he said.

Fair trade supporters urged calls to Congress members to urge them to oppose CAFTA. See www.stopcafta.org or www.tradewatch.org/cafta.

IRS GOES EASY ON BIG BANKERS: The Internal Revenue Service audits the tax returns of large financial institutions at one-fifth the rate of corporations in manufacturing, mining, heavy construction and agriculture, the Transactional Records Access Clearinghouse (TRAC) at Syracuse University found.

David C. Johnston of the New York Times noted 4/11/05 that even as the government says that high-level tax cheating is growing, TRAC found the IRS has cut the rate at which it conducts face-to-face audits of individuals who have business income. Last year, 45 million of the 130 million individual tax returns showed income from sole proprietorships, also known as Schedule C businesses, or from partnerships, S corporations and other business entities. In 1997, the agency conducted face-to-face audits with 5.6% of taxpayers reporting such business income. By 2002, that was down to 2.1%, and the next year it slipped to 1.9%. Last year the figure fell to 1.7%.

ThinkProgress.org noted that in 2004, only 0.65% of all corporations were subject to a face-to-face audit. The IRS refuses to release the number of total audit hours for corporate audits. (The information is available for individual audits.) This makes it impossible to know how much time the IRS is spending making sure corporations comply with tax laws. ThinkProgress noted that the data suggests that that the Bush administration has given large corporations, especially in the financial services industry, a hidden tax cut. Not only are rates lower and the loopholes expanded, but enforcement has been relaxed.

CASTRO MOURNS POPE: If American politicians exploited the death of Pope John Paul II, even Cuban President Fidel Castro found common ground with the late pontiff. "It's true that the pope was very critical of communism," Castro said. "But he also became very critical of the capitalist system." Castro also praised the pope for his compassion for the world's poor, his anti-war politics, and his rejection of a long-standing trade embargo against Cuba by the US, Associated Press reported.

WAL-MART UNION BRIBES SUSPECTED: Federal officials are investigating suspected expense-account abuses involving Thomas M. Coughlin, Wal-Mart Inc.'s vice chairman who abruptly quit the company 3/25/05, the *Wall Street Journal* reported 4/8/05. Wal-Mart announced that it found questionable transactions totaling between $100,000 and $500,000. Coughlin reportedly told Wal-Mart employees some of the money was used for anti-union activities, including paying union staffers to inform on pro-union workers in stores. That would be a crime under the federal Taft-Hartley Act, the *Journal* reported. Wal-Mart has vigorously opposed union organizing efforts.

DELAY: MOSCOW AGENT? After reading in the *Washington Post* that Tom DeLay's trip to Russia in 1997 was financed by a firm with "tight connections to the Russian security establishment," Kevin Drum of WashingtonMonthly.com remembered that DeLay was quite vocal in opposing Bill Clinton's action to stop Serbian genocide in Kosovo, and that the Russian security establishment was one of the biggest defenders of Serb interests. In fact, William Saleton wrote for *Slate*, DeLay in 1999 led the House effort to defeat a resolution of support for the NATO military campaign to stop the "ethnic cleansing" of ethnic Albanians. DeLay blamed Clinton's intervention with aggravating the problem and said Serbian President Slobodan Milosevic was "stronger in Kosovo now than he was before the bombing." DeLay said the bombing was a mistake, "And this president ought to show some leadership and admit it, and come to some sort of negotiated end." That was before Milosevic was defeated in a 2000 election, the Serbian government capitulated to NATO and handed Milosevic to the War Crimes Tribunal for prosecution. Of course, DeLay may have simply been engaging in partisan posturing to undermine a Democratic president's military intervention. But it is interesting to learn his close relations with the successors to the KGB.

WAL-MART WORKERS GET PUBLIC HEALTH: Wal-Mart has more workers on Medicaid than any other corporation in America, ThinkProgress.org stated. One reason is that the corporation would rather let the taxpayer pick up the tab for workers who are paid poverty wages and can't afford the corporation's health coverage. "There are government assistance programs out there that are so lucrative it's hard to be competitive, and it's expensive to be competitive," Wal-Mart CEO Lee Scott told reporters 4/5/05, according to the St. Louis Post-Dispatch.

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