re: #93 Fozzie Bear

Lots of fuzzy logic with that one (that would be luap nor).

Bush came into office on the heels of the dot com bust and the 9/11 attacks caused significant economic disruptions. Congress passed and Bush signed the EGTRRA of 2001 in response. Some of the tax cut provisions were accelerated in 2003 under the JGTRRA of 2003. In both cases, the tax cuts expire after 2010, meaning that the rates revert to the pre-cut levels unless Congress now acts.

Raising taxes into the teeth of a recessionary environment isn’t a good idea politically, and doesn’t make much sense economically.

The reason that these tax cuts are expiring is because doing so was so that the Congress could claim that the budget was revenue neutral for CBO scoring purposes and to ensure passage.

I do think that there is room for negotiation on the tax system, and it could involve three distinct but related components.

1) Create a new tax bracket at either 40 or 45% while keeping the other rates where they are.
2) Anyone making more than $1.5 million or $5 million (and thereafter indexed for inflation just as with other tax brackets) would be subject to the new rate - but not entitled to credits, deductions, or exceptions.
3) Along with the new bracket, eliminate the AMT so as to simplify the tax structure (and that would eliminate the yearly game of Congress manually adjusting the AMT levels).

You would get tax simplification, improved compliance, and the revenues necessary to help close the deficit. The rate and bracket would be based on a revenue neutral aspect so as to eliminate the AMT but pick up additional revenue. I’d lean to the 40% and $1.5 million threshold, and a further compromise could involve allowing limited credits and deductions up to $5 million, but no credits and deductions thereafter.

And once you see how well that works, you could reevaluate the tax code for the other tax brackets in a similar fashion so as to simplify the collection and compliance.