AMT 'patch' needed for stable economy

Nobel Prize-winning economist Milton Friedman once observed that "Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay."

Today's tax burden on American families is too high. Yet many in Congress are trying to take even more money out of the pockets of taxpayers, and pour it into the vaults of big government. The fact is that everyone pays for higher taxes - whether it's directly through tax withholdings, or indirectly through higher prices through goods and services.

With rising costs to fill-up a gas tank or put food on the family dinner table, increasing taxes will only further strain family budgets. In the Senate, I am committed to fighting tax hikes so that on Tax Day, April 15, Texans are not overburdened.

For example, the Alternative Minimum Tax (AMT) has become a perennial point of tax debate. The AMT was established by Congress in 1969 to prevent a small number of highincome individuals from using large deductions to evade paying their federal income taxes. Although created to address a few unusual instances, the AMT was never indexed for inflation, and as a result has impacted more and more Americans as family incomes have risen. In 2001, the AMT affected 1.8 million taxpayers. By 2010, this number will rise to more than 30 million.

In an effort to address this problem, Congress raised the exemption amount to $42,500 for single taxpayers and $62,550 for married taxpayers in 2006. When the patch expired at the end of 2007, several of my Senate colleagues and I fought for, and won, another extension. That means that more than 23 million taxpayers will not be hit with a $1,700 tax increase on their 2007 returns.

There is much more to be done to keep Texans' taxes low. Texas is one of eight states with no state income tax. I believe that we should extend the sales tax deduction, just as we extended the AMT patch, so that Texans will be able to deduct state sales taxes on their federal returns.

More broadly, Senate leadership recently proposed a 2009 budget resolution that includes a staggering and historic $1.2 trillion tax increase. And in December, when the AMT patch expires, we can expect a fight with "tax and spenders" who declare that they will support an extension of the AMT fix only if it also includes a $70 billion tax hike.

I believe that a clean AMT patch in 2008 and beyond will be crucial to the stability of our economy. It would also set the stage for the broader goal of making the 2001 and 2003 tax cuts permanent.

Let's remember that those tax cuts brought historic reductions to individual tax rates, death taxes, capital gains taxes, and taxes levied on small businesses. They have provided relief to American families by increasing the child tax credit from $600 to $1,000 per child. They also significantly reduced the marriage penalty by doubling the standard deduction for a married couple.

But in 2010, those tax cuts, which spurred growth and created 8.1 million jobs and record tax revenue, are set to expire. If they are not made permanent, we will witness the largest tax increase in American history. It will shock our economy and hit taxpayers squarely in the pocketbook. Estimates show that the average Texan would shoulder a $2,381 tax increase and a $1,797 loss in personal income.

In light of these alarming figures, I believe that there is no justification for raising taxes at this time. The absurdity of such a tax hike would only be compounded by the fact that it would nullify the benefits of Congress' recent economic stimulus package!

As you prepare your taxes this season, rest assured that I remain dedicated to strengthening our American economy through lower taxes and support of small business.

Kay Bailey Hutchison is the senior U.S. Senator from Texas and is the Chairman of the Senate Republican Policy Committee.