Editorial: Don’t give away the store

Friday, Nov. 16, 2007 | 7:23 a.m.

A bill limiting the number of people in the upper middle class who pay the alternative minimum tax passed the House of Representatives last week and now is in the Senate.

Nearly everyone agrees the upper middle class should be exempt from the tax, which was passed in 1969 to make sure the wealthy didn't escape paying taxes. But because the tax was not indexed to account for inflation, millions of people and families, including some making less than $100,000, could be forced to pay the tax.

Republicans are balking at a provision in the House bill that closes loopholes in the tax code, thereby raising taxes on wealthy Wall Street financiers and chief executives. That provision was necessary to meet the Democrats' pay-as-you-go pledge. Made after Democrats took control of Congress, the pledge requires that the cost of new programs or tax cuts be offset by tax increases or budget cuts.

Sen. John Ensign, R-Nev., plans to use the bill to create a campaign issue. Instead of addressing the fiscal realities, as the Democrats have, he wants to waive the pay-as-you-go rule to make permanent the Bush administration tax cuts, which principally benefit the rich and are set to expire in 2010.

As Lisa Mascaro reported in Tuesday's Las Vegas Sun, Ensign said if his proposal does not succeed, tax cuts "will become a campaign issue - absolutely will become a campaign issue."

Even though his proposal would cost the U.S. Treasury billions of dollars, he said tax cuts would mean more tax dollars because they stimulate the economy and create more investment.

"It astounds me that senators continue to make this argument because it's patently false," said Adam Hughes, director of fiscal policy at OMB Watch, a fiscal watchdog group.

The reality, Hughes said, is that tax cuts generate only a fraction of what is lost for the U.S. Treasury.

Ensign, who heads the effort to elect Republicans to the Senate, is trying to protect his party's benefactors on Wall Street. If he raises his plan in the Senate, Democrats should encourage debate. Ensign wants to let tycoons take their billions tax-free while letting the average guy foot the bill. That is an election issue.