Senate Pops PAYGO Cherry

Senatorial booby grabLast night, while Mom was out of the house, the Senate popped it's PAYGO cherry with the AMT patch bill. For those readers not intimately familiar with budget rules and tax wonk jargon, PAYGO is the system by which every tax reduction must be paid for by an increase somewhere else (or, lol, a spending cut) and AMT is the Alternative Minimum Tax. The AMT was meant to apply only to really rich people but because it was so poorly written it's about to apply to 23 million people on April 15 and, you know, 2008 is an election year.

But, since Congress doesn't want to have to fix the whole system (because they haven't yet figured out how), they just want to keep 19 million more Americans from paying the AMT next year while they come up with a better plan (which is basically what Congress has done every year for the last several years because they don't know what a better plan would be). This year, however, was different because the House legislation to temporarily stave off dealing with the problem (i.e., cut taxes temporarily) had to be paid for by a permanent tax hike under those pesky PAYGO rules... and that's where things got sticky.

While the temporary tax cut/permanent increase package passed the House unmolested, Finance Committee Chair Max Baucus (pictured) was unable to shepherd the House's little girl through the Senate fast enough to save the tax bills of those aforementioned 19 million Americans. So, he gave it up and made the Senate pop its PAYGO cherry - i.e., pass a tax cut without a corresponding tax hike in violation of the PAYGO vow (which, it turns out, is sorta more like a promise). Republican tax guys are high-fiving one another and making finger guns up and down K Street as we speak, figuring that once you get the girl to give it up the first time, all the times after that will require much less effort.

Senate Backs Freeze on Tax Without Cost Offsets [NY Times]


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