A New York Times report ignored the primary reason that the Senate has failed to act to reform the alternative minimum tax (AMT) -- so Senate Republicans can improve the chance of passing capital gains and dividend tax cuts next year as part of the same reconciliation package. The article also omitted the reasons why Democrats object to the tax-cut plan -- they would benefit the wealthy on the heels of spending cuts that targeted the poor and would far outweigh recently approved spending cuts.
In a December 14 article by reporter Carl Hulse, The New York Times failed to identify the apparent reason the Senate will likely not act to "shield millions of middle- and upper-income taxpayers from a larger income tax bite" by cutting the alternative minimum tax (AMT) before the end of the year: Senate Republicans have reportedly put off the legislation in order to improve the chances of passing cuts on capital gains and dividends taxes early next year as part of a reconciliation bill that would also include the AMT legislation. Hulse also omitted Democrats' primary objection to the tax cuts on investments -- that they would benefit only the wealthy, immediately following the recent passage of legislation featuring significant spending cuts that target the poor -- as well as Democratic concerns over the impact of the cuts on the federal deficit.
Without reporting why Majority Leader Bill Frist (R-TN) said he might delay action on AMT relief, Hulse reported only Frist's December 13 statement that the Senate would likely not consider legislation on the AMT before the end of the year, adding that "Frist's position means it is likely that Congress will also delay until 2006 a larger debate" on extending the tax cuts on capital gains and dividends:
Senator Bill Frist, the majority leader, said Tuesday that Congress was not likely to act this year to shield millions of middle- and upper-income taxpayers from a larger income tax bite as lawmakers moved into the final days of the session with many major issues hanging in the balance.
In laying out what he hoped to accomplish before adjourning for the year, Mr. Frist, Republican of Tennessee, said that "in all likelihood" the Senate would not try to reach agreement with the House on competing $30 billion plans to reduce the impact of the alternative minimum tax. The tax, originally created to prevent the rich from escaping tax liability, is expected to reach another 15 million Americans next year because of inflation.
Mr. Frist's position means it is likely that Congress will also delay until 2006 a larger debate over nearly $100 million in tax breaks that Republicans say are essential to economic growth. But the House and Senate have taken different approaches on tax relief, with the House extending lower tax rates on investments while the Senate balked because of opposition from Democrats and Republican moderates.
But unlike a December 14 report by Bloomberg News that also ran in the Washington Post, Hulse failed to note that Frist was apparently putting off action on the AMT legislation because he wanted cuts in capital gains and dividends taxes, like those approved in the House, to be included in the bill amending the alternative minimum tax; the AMT fix would provide middle-class and upper-income tax relief, and both Democrats and moderate Republicans are eager to pass it. Bloomberg News noted that Frist's suggestion that he would postpone action of the AMT legislation "indicat[ed] that extending tax cuts on capital gains and dividends was a higher priority":
Senate Majority Leader Bill Frist (R-Tenn.) said Congress may postpone until next year a measure to prevent 15 million households from paying $30 billion under the alternative minimum tax, indicating that extending tax cuts on capital gains and dividends was a higher priority.
"I feel strongly that capital gains and dividends should be in the bill when it comes back to the Senate floor," Frist told reporters. Of the minimum tax, he said that "in all likelihood, we'll not be able to finalize that until we get back" in 2006.
The Senate will likely take up the tax-cut extensions either before it adjourns at the end of this week or early next year. Frist's comments signaled that the Senate may remove the AMT measure from budget legislation it passed in November, adopting instead a measure passed by the House last week to extend the 15 percent rate on dividends and most capital gains until 2010.
Further, Hulse ignored a prior report by the Times that had identified the Republican tactic of altering the Senate bill -- which included legislation affecting the AMT but not extending the tax cuts on investments -- in order to increase the likelihood that the capital gains and dividends cuts could pass the Senate. In that December 9 article, the Times noted that Republicans "are betting" that Senate Democrats want the AMT legislation to pass "badly enough" that the Democrats would be forced to vote for the tax cuts on investments if the Senate bill were revised to include those cuts and the AMT legislation in one bill:
The biggest difference [between the House and Senate tax cut bills is] on tactical approaches over the total of cuts. Part of a Senate budget "reconciliation" bill authorizes a maximum of $70 billion in tax cuts over five years. Tax cuts of $70 billion or less can pass the Senate by a simple majority of 51 votes, rather than the 60 votes normally needed to block a filibuster.
The House included $56 billion in cuts as part of the reconciliation process. The other cuts, including those related to the hurricane and the Alternative Minimum Tax, are separate and would need 60 votes to clear the Senate.
House Republicans are betting that that [sic] Democrats want those other cuts badly enough that they would not dare block them through a filibuster. If that proves correct, Senate Republicans would be able to put the cut for stock dividends in the final "reconciliation" bill and pass it with 51 votes.
"We don't need a reconciliation bill in the House," [Rep. Bill] Thomas (R-CA) said Wednesday on the floor. "We are just doing this to help the Senate."
The December 14 Times report also ignored the reason Democrats have given for opposing the tax cuts on investments, despite reporting the Republican claim that the cuts "are essential to economic growth." Democrats argue that the cuts benefit only the wealthiest Americans and come on the heels of spending cuts targeting the poor.
Finally, the Times failed to report that the House's proposed tax cuts on capital gains and dividends -- cuts Frist now plans to include in the Senate bill -- far exceed the recently passed spending cuts. The spending and tax cuts together would therefore add $44 billion to the deficit, even though Republicans pushed the spending cuts through Congress for the expressed purpose of trimming the deficit. Other media outlets have also failed to identify the magnitude of the tax cuts in relation to the spending cuts, as Media Matters for America has documented.