Economic Recovery Compromise Makes Rich, Richer: The Alternative Minimum Tax

The President's Economic Recovery Act plan, called the Economic Stimulus and much needed, is headed toward passage but only because of a compromise that essentially makes the rich, richer. It's also a good reason why I believe we need to have a program that gives at least $3,500 to each American under $100,000, rather than just tax credits.

Reportedly, $100 billion was shaved off the plan, but according to the blogger LithiumCola at The DailyKos, the big reason why the plan was cut, and why the Senate plan was about $80 billion more expensive than the House plan, was the installation of a provision adjustment in what's called The Alternative Minimum Tax, such that the AMT increases incomes for those making more money, whereas it has little if any impact on those making less, specifically:

Haley points to a study at the Tax Policy Institute which shows that slashing the AMT increases the incomes of Americans in the top quintile by 1.3%, Americans in the next-highest quintile by .7%, the middle quintile by .1%, and does nothing at all for Americans in the bottom 40% of incomes.

To put that another way, Americans in the middle 20% of incomes will get on average a whopping $52 because of Senator Grassley's demand, those in the second-highest 1/5th will get $502, while Americans in the top 1/5th of incomes will get an average $2,593 -- and that last one includes those in the top 5%, who will get an average of $4,511. This is what the WSJ calls "shielding millions of middle-income Americans from the so-called alternative minimum tax."

It's for this reason I continue to push for a targeted stimulus of $3,500 for every American under $100,000 in income, or an planned allocation capped at 100 million people. The total cost would be $350 billion, and worth every penny.




According to the Federal Reserve Board 2004 survey of consumer finances, the average balance for those carrying credit card balances was $2,200, but many American families do not carry a credit card balance, so the fear that this $3,500 would be used only to retire credit card debt is unfounded. Indeed, there's more evidence to support the observation that the money would be used -- especially by those in the lower income categories -- just to keep a roof over their heads.

US Sherriff's don't want people evicted as record home foreclosure rates are expected. This proposal, combined with relaxed mortgage rates and anticipated refinancing plans, could help to keep Americans in their homes for at least an additional two years. That buys enough time for the other job-producing aspects of the Economic Stimulus plan to take effect.

In closing, given the trillions of dollars sent directly to corporations, $350 billion to the Americans who need it the most is not too much to ask for.


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While Obama Offers Solution To Preditory Credit Cards, Clinton Has Flip Flopped On Issue

Today, in Iowa, Senator Barack Obama offered a solution to the growing problem of credit card debt:

Obama called for new restrictions on "predatory" credit card companies he says deceive consumers into piling up massive debt they have little hope of repaying.

"The truth is, our middle-class families are not going to be secure so long as they can't get out of debt," Obama said Monday, sharpening the populist rhetoric of his presidential campaign. "If we're serious about stopping Americans from falling deeper in debt, we've got to crack down on predatory credit card companies that are pushing them over the edge."

Obama pointed to studies showing that consumers have an average personal debt of more than $8,000, a load driven higher by credit cards. He said soaring credit card debt could turn into a crisis as big as the one in the subprime mortgage industry.

"The larger risk is that what's happening in the housing market could lead to a slowdown in the entire economy," he said.

While Obama takes the issue head on Senator Hillary Rodham Clinton has a history of flip-flopping on the matter. Take what Harvard Professor Elizabeth Warren said on Frontline regarding how Clinton first had President Bill Clinton reject, then turned around and as Senator supported the same banruptcy legislation that would have forced credit card companies to change their policies...

And Sen. [Hillary] Clinton?

Sen. Clinton, when she was first lady, [was] responsible for stopping the proposed bankruptcy legislation. The White House had been quietly supporting it, and it was First Lady Clinton who talked with her husband and persuaded him that the bankruptcy bill was hard on women, hard on families, hard on older Americans, and was a bad idea in general. And the last act that President Clinton took with Congress was to veto the bankruptcy bill. Mrs. Clinton took credit for that in her autobiography, and by golly, she deserves it. She stood up --


And today?

Sen. Clinton, when she was elected, the financial services industry brought this bill back. And so one of the very first bills that came up after Sen. Clinton had taken office was the bankruptcy bill. Oh, [there were] a couple of cosmetic changes to it, ... but it was the same bill that had been there at that point already for four years. And Sen. Clinton voted in favor of the bill.


Better bill?

No.


Why?

The financial services industry is a big industry in New York, and it's powerful on Capitol Hill. It's a story of how much influence this industry group wields in Washington that ... they can bring to heel a senator who obviously cares, who obviously gets it, but who also obviously really feels the pressure in having to stand up to an industry like that.

So it's clear the credit card lobby "got to" Senator Clinton, making it doubtful Americans will see any real advance or relief in this area if she's elected President.