Friday, November 2, 2007

Dollars and Nonsense

Halloween is over, but Mike Rogers is still wearing his Fiscal Responsibility costume.

He's written another fact-free letter on budget policy targeting Congressman Charlie Rangel (D-NY), chair of the House Ways and Means Committee. Displaying a shaky grasp of the Michigan Constitution, federal tax policy and how Congress enacts laws, Rogers writes

On the heels of Democrat Governor Granholm raising income taxes on every Michigan family by 12% and adding a new 6 percent tax on services, Representative Charlie Rangel, the Democratic chairman of the Ways and Means committee and the man in charge of writing all tax laws, recently introduced a plan that will further hurt Michigan’s economy and families.
As with most of Mr. Rogers’ oh-so-scary pronouncements, there isn’t much “there” there when you strip away the partisan rhetoric. Rogers is actually referring to H.R. 3970, The Tax Reduction and Reform Act of 2007. The opening paragraph from the Ways and Means Committee summary reads:
The combination of the general tax reductions below and full repeal of the individual alternative minimum tax (AMT) would result in tax relief for approximately 91 million families. Even with offsets, virtually all families with income under $500,000 will see a net tax reduction.
(emphasis mine; please note that the phrase “except for Michiganders” does not appear in this description.)

Without making everyone’s eyes glaze over – including mine – here’s a quick overview of H.R. 3970:

Who pays less under this bill?

Working Americans -- it increases in the standard deduction (up to $850 more for married couples filing jointly)

Families -- it doubles the percentage of the refundable child credit from 7.65% of earned income up to 15.3% of earned income.

Teachers – elementary and secondary teachers can deduct up to $250 for the cost of books, supplies and supplementary materials used in the classroom.

Active Duty military – service members can include combat pay as part of their earned income to qualify for the Earned Income Tax Credit.

Lots of other taxpayers – The bill would repeal the Alternative Minimum Tax (AMT). In a nutshell, the AMT was enacted in 1969 to address the fact that many wealthy Americans were taking so many deductions they were actually paying little or no federal income taxes. It was a good idea, but because AMT wasn’t indexed to inflation it hurts more middle-class families every year. The Congressional Budget Office estimates that up to 30 million taxpayers will be affected by the AMT in 2010, up from just over 1 million in 2001.

Last year, the IRS’s National Taxpayer Advocate’s Report called it “the poster child for tax law complexity” and recommended that Congress repeal the AMT.

Oh, and here’s a surprise: the bill reduces the top corporate tax rate from 35% to 30.5%.

Who pays more under this bill? (Or, Can You Hear the Closing of the Loopholes?)

Investment fund managers – when they earn income from carried interest in an investment fund (known as “investment management services” income), it will be taxed at the ordinary rate, instead of the current lower capital gains rate.

Investment fund managers Part 2 -- they won’t be able to use offshore tax havens to defer paying taxes on income received for “investment management services.”

Corporations that shift jobs overseas – The current law lets companies defer paying on income earned overseas, but they are still able to take deductions on this income on a current basis. In a nutshell, American taxpayers are footing the bill for corporate tax breaks from shifting jobs overseas. The bill would require that the deductions would have to be deferred, too. The revenue from this change would encourage corporations to create jobs here in the United States. This proposal is estimated to raise $106.39 billion over 10 years.

Unless otherwise noted, all figures are from the House Ways and Means Committee summary of HR 3970

The bottom line: the 2007 Tax Act makes sense for working Americans. It also meets the standards of “pay as you go” by eliminating the AMT and closing a number of loopholes.

How, exactly, is this bill bad for Michigan families, small business owners and farmers?

Speaking of the home front...

... if Mr. Rogers is really so concerned about the impact of government expenditures on Michigan families, perhaps he could express that concern by urging State Sen. Majority Leader Mike Bishop and other state GOPers to support legislation that would cut MI lawmakers’ pay by 5% (HCR 26), and eliminate free lifetime health care for term-limited politicians who serve for 6 years in the State legislature. (HB 4580)

Oh, I forgot. Politicians like Mike Rogers are happy to have taxpayers pick up the tab when it's to his benefit.

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