Grassley on AMT: Repeal, not Reform

One of the classic rhetorical tricks used by anti-taxers is to characterize a tax as being so fundamentally flawed that it simply can't be saved. In other words, these guys will argue that repeal, not reform, is the only way to go. We've seen it ad nauseum with the estate tax, and now we're seeing it with the Alternative Minimum Tax (AMT). Here's Senator Chuck Grassley, appearing on CNBC's "Kudlow and Company:"

KUDLOW: Senator, is there any way that you can personally get me out of the AMT? I got nailed this year. I didn't know it was coming?
Sen. GRASSLEY: Yeah, I need seven more votes in the United States Senate. Because on the budget resolution, I had an amendment to do away with the alternative minimum tax, and I got 44 votes. So get me seven more votes, and we'll get rid of the AMT for everybody because, you see, what's wrong with the AMT, it was only supposed to hit very wealthy people in 1969. It
wasn't indexed. It's going to hit 23 million people this year. And we're counting on income coming in that was never supposed to be collected in the first place. And we even reached a point where very wealthy people have found ways around the alternative minimum tax. I'm surprised you haven't. But anyway...
KUDLOW: I did my best.
Sen. GRASSLEY: OK.

Both halves of what Grassley says here are true. In fact, absent Congressional action, 23 million Americans will owe the AMT in 2007. And, because Congress has added many of the same loopholes to the AMT that originally plagued the regular income tax, the AMT is less good at backing up the regular tax than it used to be.

But it doesn't follow that outright repeal is the only solution-- or even the best solution. As CTJ has demonstrated, repealing just one of the AMT loopholes-- the special AMT tax break for capital gains income-- could almost singlehandedly pay for increasing the AMT exemptions in a "tax swap" that would restore the AMT to its original purpose of ensuring that truly wealthy taxpayers should pay at least a minimal amount of income tax.

A sensible discussion of AMT reform options is arguably too much to expect from Kudlow's program. But is it too much to expect from Senator Grassley?