WASHINGTON - The House Committee on Ways and Means today held a hearing on fair and equitable tax policy for America’s working families. The morning session focused on the current structure of our tax code and the fairness and effectiveness of the Bush tax cuts and the Alternative Minimum Tax (AMT). The panelists described the budgetary effects of large tax cuts and how such cuts necessitate either a cut in spending or an increase taxes in order to promote economic growth.
The panelists also discussed the distribution of benefits under the Bush tax cuts. In particular, they examined how the alternative minimum tax takes back much of the promised benefits of the Bush tax cuts for working families.
Excerpts from witnesses appearing on the first panel:
On the danger of the AMT:
"Does it matter that the tax cuts threaten millions of middle-class families with the AMT? Yes. The AMT violates virtually every principle of tax policy. It is not fair: it penalizes married couples, includes nasty bracket creep, and disallows many legitimate deductions, such as certain legal fees. The AMT is inefficient: most taxpayers face higher effective marginal tax rates under the AMT than they would under the regular income tax-and that problem is getting much worse as more middle-income people become subject to the AMT. The high tax rates discourage saving and working and encourage tax avoidance. And the AMT is hideously complex. It confounds taxpayers trying to comply with the law."
- Len Burman, written testimony
On equity and fairness:
"Although taxes are still progressive they have done relatively little to offset the increase in inequality. As noted, since 1979 the share of before-tax income going to the top 1 percent has increased by 7.0 percentage points. Absent the tax cuts from 2001 through 2004 the corresponding after-tax income share would have risen by 5.6 percent.... Put another way, the progressive tax code would have automatically offset 20 percent of the increase in before-tax inequality. The tax cuts from 2001-06, however, undid most of this automatic stabilizer.
"By themselves these tax cuts have exacerbated after-tax income disparities, thus resulting in more inequality."
Jason Furman, written testimony
