If you use Zandi’s analysis, the programs eliminated have a stimulative effect equal to more than $100 billion, while the AMT proposal that replaces them has a stimulative effect of only $35 billion. That $65 billion loss could cost the economy something on the order of half a million jobs over the next several years. Full Story »
Posted by Lynn Caporale
Excellent look at the impact of Senator Charles Grassley's $70 BILLION insistence on 'fixing' the annual 'alternative minimum tax problem' as part of the "economic stimulus package." Lost in the process: $40 million for fiscal relief to the states, $20 billion for repair and maintenance for local schools, $10 billion for other programs including early learning programs for children.
But there is one huge provision in the package passed by the Senate today that fails utterly and completely to meet any rationale measures of job creation. That provision was not requested by the president and was not contained in the House-passed legislation. Yet it alone accounts for most of the difference between the Collins-Nelson substitute and the House-passed stimulus, and it will dramatically reduce the job creation impact of the package. The provision is the annual fix to the alternative minimum tax problem, which was thrown into the stimulus package in the Senate Finance Committee by Senator Charles Grassley (R-IA)—an opponent of the House bill and the Collins-Nelson substitute. Grassley told National Public Radio, “Every year we have a tax problem with the alternative minimum tax… the committee adopted my amendment so that we don’t hit those 24 million middle income people. Now is that stimulus? Not exactly, [underlining added] but when you have… uncertainty in tax policy it is not good for the economy.”
The AMT’s $70 billion price tag crowds out $40 billion in fiscal relief to the states; $20 billion in repair and maintenance for local schools, community colleges, and universities; and $10 billion in assorted other programs, including child care block grants and Head Start. If you use Zandi’s analysis, the programs eliminated have a stimulative effect equal to more than $100 billion, while the AMT proposal that replaces them has a stimulative effect of only $35 billion. That $65 billion loss could cost the economy something on the order of half a million jobs over the next several years. The president’s commitment to creating 4 million jobs can not be met if the package that is produced by the conference contains both the alternative minimum tax and is limited to the parameters of the Collins substitute.
The AMT issue should and can be dealt with this year just as it has repeatedly been handled in the past as part of the normal annual cycle of reviewing the tax code. As Senator Grassley obviously fears, that process will drive a reexamination of loopholes and tax giveaways that he and many others on the tax writing committees would prefer not to revisit. On the other hand, 500,000 jobs are worth the inconvenience.
I would like to know Senator Grassley's personal obligations under the AMT (Alternative Minimum Tax), and why he believes that his own personal concerns--proven not to provide any economic stimulus--outweigh the other needs. The article contains a fascinating "bang for the buck" chart that indicates Senator Grassley's pet project is one of the worst options on the table, and one of the least "stimulative." Perhaps Grassley's Iowa needs no federal stimulus funds?