On Taxes: Oh No, Don’t Let the Rain Fall Down

By December 6, 2007Taxation

My husband and I are buying a new house. During the inspection, it was noted that there had been a leak in the shower. The inspector said that sometime down the road, we’d probably need a more permanent fix to the leak. We decided if we’re going to replace the shower, we might as well redo the whole bathroom, which led us to start talking about fancy tile, heated floors and steam showers. What does this have to do with tax policy?

Lisa Lerer has a story in Politico asking if 2007 is another 1986. No, it’s not, but 2009 will be. Lerer points to Ways and Means Chairman Charlie Rangel as the driver of tax reform. But, in reality, it’s being driven by a couple of slow leaks. The first leak is the estate tax. It’s repealed in 2010 but comes back at 55 percent in 2011. Congress can’t let that happen. The second leak is the Alternative Minimum Tax (AMT) It could hit 23 million tax payers this year without a patch. That number just keeps increasing each year Congress delays a permanent fix. The third leak is the expiration of the Bush tax cuts. In 2011, every taxpayer will face a huge tax increase. And more significantly, capital gains rates will jump and dividend rates will more than double – can you say market crash?

Three big leaks equals a new tax code. As we get closer to the must pass year of 2009, the debates going to get louder. But, let’s face it, Rangel’s plan isn’t a spearhead for reform, it’s just an early wish list of pedestal sinks and heated towel racks.

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