Edmund Andrews on the Clown Show That Is Bush Tax Policy

A good thumbnail sketch:

Cracking the Tax Code - New York Times : ANYONE who thinks that the federal income tax code is baffling now ought to brace for what lies ahead: big changes and uncertainty.... Never before has so much of the income tax code consisted of temporary measures. And never before has it been so inherently unsustainable. Virtually all of President Bush's tax cuts and credits... are set to expire by 2011.... [N]either Mr. Bush nor the Congress has started to address... the alternative minimum tax... a tax that was originally aimed at only the very richest people but is now set to impose big tax increases on tens of millions of middle-income families over the next few years. Mr. Bush and Congressional leaders in both parties have vowed to prevent that....

If Mr. Bush's tax cuts are extended, but the A.M.T. is unchanged, tens of millions of people will face big new surcharges. If the alternative tax is frozen or simply repealed, Congress is likely to make up for the lost money by cutting back or eliminating scores of other tax breaks. If Congress lets Mr. Bush's tax cuts expire, regular tax rates are likely to shoot up sharply but the A.M.T. may become fairly easy to repeal....

House and Senate Republicans have also been increasingly unable to agree on any long-term tax plan. Far from making Mr. Bush's tax cuts permanent, they are now struggling just to extend today's tax breaks for another year or two. "The process itself is really broken," said C. Eugene Steuerle, a senior fellow at the Urban Institute and author of numerous books on tax policy. "It presents people with a very misleading picture of what's going on. You have increases in spending without tax revenues to pay for them, and you have tax increases that won't occur."... Mr. Bush omitted any mention of the issue in his State of the Union address on Jan. 31, and the White House has been silent about the detailed proposals made last fall by his handpicked advisory council on tax reform....

This is a result of a deliberate decision by the White House and Republican leaders in Congress to have the tax cuts of 2001 and 2003 expire by 2011.... Republican lawmakers... saw political advantages. Temporary tax cuts look cheaper than permanent cuts. And many Republicans delighted in voting for the same tax cuts year after year. "What started to happen in 2001 was qualitatively different," said Joel B. Slemrod, a professor of tax policy at the University of Michigan. "Part of it was to fit the letter of the law into the budget rules, and part of it was calculated to keep issues on the agenda that were to the Republicans' favor." Whatever the reasons, virtually all the tax cuts of 2001 and 2003 and scores of other tax breaks are set to expire by 2011....

To glimpse the difficulty of the tax choices ahead, look no further than the struggle this month among House and Senate Republicans to extend just a small collection of expiring tax breaks. President Bush had placed special urgency on permanently extending his tax cut on stock dividends. But Republican leaders have not come close to that goal. The Republican-led Senate passed a $60 billion package that omitted any extension of the tax cut on stock dividends, which does not expire until 2008, in order to keep the A.M.T. from rising in 2006.

Restraining the alternative minimum tax for just one year will cost about $34 billion, while extending the dividend tax cut alone for one year would cost about $10 billion...