Alternative Minimum Tax Reform Now Part of the Senate Stimulus

Oy vey. Sen. Chuck Grassley (IA), senior Republican on the Finance Committee, just won approval of a one-year fix for the alternative minimum tax as part of the upper chamber’s stimulus bill, at a cost of $70 billion over 10 years.

Anyone looking for background on what the AMT means for taxpayers can find it here. But what this means for Congress is a potentially huge headache.Exempting taxpayers from the AMT is an unsavory but necessary annual task for lawmakers, largely because the tax is too costly to permanently repeal without adding politically dangerous weight to the deficit. Fiscal conservatives in the House, led by the Blue Dog Democrats, almost always insist on offsetting the cost of the AMT fix — but they’re usually forced to cave in order to get the fix through the Senate.

Putting the annual AMT fix on the Senate stimulus isn’t a bad idea at all from Grassley. But it’s the very definition of a non-stimulative addition to the bill — and it was going to get done anyway. Not to mention that the Obama administration opposes fixing the AMT in this format, as House Ways and Means Committee Chairman Charles Rangel (D-NY) has said.