Looks like an ambitious tax plan. The individual side replaces the AMT with a surtax on high-income taxpayers and beefs up the EITC. The corporate side looks like an 1986-style reform – close loopholes in exchange for lower rates.
On individual taxes, the heart of his plan calls for eliminating the alternative minimum tax — which was originally created to prevent millionaires from taking too great advantage of tax breaks but now touches people with upper middle incomes and is poised to affect tens of millions of families with incomes as low as $50,000 a year.
Eliminating the alternative tax would reduce projected revenue by almost $800 billion over the next 10 years, according to Congressional estimates.
Mr. Rangel’s bill would also expand some tax breaks for middle- and low-income people. It would increase the standard deduction, at a cost of $48 billion over 10 years. And it would widen the earned- income tax credit, which primarily benefits working single parents with low incomes, to include more low-income workers who do not have children. That would cost $29 billion over 10 years.
To offset the cost of those reductions, the bill would impose a new “replacement tax” for the top 10 percent of income earners who would have otherwise had to pay the alternative minimum tax.
The replacement tax would not apply to couples with incomes as low as $200,000, but aides to Mr. Rangel said many people with incomes as high as $500,000 would still end up with at least slightly lower taxes than under current law.
In effect, the bill would roll back a big part of Mr. Bush’s tax cuts for people with top incomes. In that respect, it is similar to the general positions on taxes that most of the Democratic presidential contenders have taken.