Sunday, April 16, 2006

Read My Lips... No New Taxes

Some of you may remember that statement said by George I during his run for presidency in 1988. While his defeat in 1992 was multifactorial, much of his credibility was lost when in fact he did raise taxes during his presidency. George II, most Republicans and Democrats agree on this, is likely not the most intelligent president this country has seen... but he does learn from his father's mistakes. One of his political successes was to push through substantial (but temporary) tax breaks with some expiring in 2010. Currently, there is debate regarding whether to make these breaks permanent.

Politicians are a savvy group; that is why they are politicians. Increasing taxes requires action that politicians cannot necessarily sneak under the noses of their constituents; most are opposed to having to pay more taxes and will vote accordingly (see George I again). But allowing tax breaks to expire has the same effect as raising taxes... it's just that doing so is passive and most will not realize they will owe more taxes until the tax bill comes due. In 2006, the Alternative Minimum Tax (AMT) Patch expired and "one in four families with children, up from one in 22 last year, will owe up to $3,640 in additional federal income tax come next April" (NY Times). Now while I don't fall into the AMT and this doesn't effect me, it seems disingenuous for officials to state that they do not raise taxes but in fact, allow tax breaks to expire without mention.

While permanently lowering the taxes on dividends and long-term capital gains is great...I would prefer that Congress act to fix the AMT as it effects many millions more. 2008 will be an interesting election...depending on which party gets elected, the approach to balancing the current budget mess will be very different. Will the gap between the haves and the have-mores continue to widen? Probably, but who to elect in 2008 to fix this mess will be crapshoot...most do not practice what they preach during the campaign trail. Smoke and mirrors man... like the last scene in Enter the Dragon.
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