Saturday, December 8, 2007
"I'M NOT in favor of waiving pay-go rules," said Senate Majority Leader Harry Reid (D-Nev.) "I think we cannot waver on that." But that was last month. The end of the congressional session is looming. So is the prospect of a tax increase that would hit more than 23 million Americans if the alternative minimum tax (AMT) is not adjusted. Republicans -- who might as well rename themselves the Grand Old Party of Fiscal Irresponsibility -- refuse to pay the $50 billion tab for the one-year fix. They refuse to do away with the "carried interest" loophole that lets venture capitalists and hedge fund operators pay lower capital gains rates on ordinary income, and they refuse to countenance any other method. So Mr. Reid wavered, and the Senate passed the AMT patch with no offset by a vote of 88 to 5. The measure ensures that millions of reasonably well-off taxpayers -- as Len Burman of the Tax Policy Center points out, 85 percent of the benefit goes to those earning $100,000 or more -- will avoid a tax hike. Their grandchildren will have to pick up the tab.
Now the venue for wavering moves to the House, where Democratic leaders have tried hard to live by the pay-go rules they imposed on themselves at the start of this Congress -- have tried, that is, to pay for tax cuts or increases in mandatory spending with offsetting spending reductions or tax increases. The House proposed paying for the tax fix by clamping down on the "carried interest" loophole; when that ran into resistance, Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) offered to come up with a different, less controversial set of offsets. The House is expected to take that up next week and send it to the Senate.
But the die, sadly, already appears cast. In the end, the House will take up and pass an AMT without paying for the fix. House Majority Leader Steny H. Hoyer (D-Md.), in a visit to The Post yesterday, was refreshingly frank about the trade-off involved. "It is a loss for the country if we don't pay for it," said Mr. Hoyer, who plans to vote against it. But it is a political gain for Democrats; it will, Mr. Hoyer said, "preclude a political defeat in terms of demagoguery about taxes" from Republicans. Asked why Democrats shouldn't be criticized for this choice, Mr. Hoyer said, "I think you are right to rake us over the coals for passing an unpaid-for AMT."
The majority leader later called to revise and extend his remarks, saying he had been "too glib and too quick." Senate Democrats, he noted, only abandoned pay-go "after it was impossible to move anything else, after Republican opposition" and in the face of a presidential veto threat. We understand that Democrats tried; we understand the political pressures they face. We also agree with what Mr. Hoyer said the first time -- and with his plan to vote against the fix.