A Chequer-Board of Nights and Days

I have long advocated a fundamental change in our tax system, one that would rely either on flat or consumption taxes to bring revenue to the federal government. The use of such taxes would make the process easier and less expensive for taxpayers to comply with, broaden the tax base and consequently, actually increase revenue.

Instead, I get the same old class warfare as a policy:

House Democrats looking to spare millions of middle-class families from the expensive bite of the alternative minimum tax are considering adding a surcharge of 4 percent or more to the tax bills of the nation's wealthiest households.

Under one version of the proposal, about 1 million families would be hit with a 4.3 percent surtax on income over $500,000, which would raise enough money to permit Congress to abolish the alternative minimum tax for millions of households earning less than $250,000 a year, according to Democratic aides and others familiar with the plan.

Rep. Richard E. Neal (D-Mass.), chairman of the House subcommittee with primary responsibility for the AMT, said that option would also lower AMT bills for families making $250,000 to $500,000. And it would pay for reductions under the regular income tax for married couples, children and the working poor.

All told, the proposal would lower taxes for as many as 90 million households, and Neal said it has broad support among House leaders and Democrats on the tax-writing House Ways and Means Committee. "Everybody's on board," he said.

Neal has yet to release details of the plan, however, and others inside and outside the committee say major pieces of it are still in flux. Some Democrats say Neal's plan stretches the definition of the middle class too far, providing AMT relief to too many wealthy households. They argue that the cutoff for families to be spared from the AMT should be lower, at $200,000, $150,000 or even $75,000.

"There is consensus to make sure that we have some responsible tax policy that will also treat taxpayers fairly. No one ever expected to be caught in the AMT making 75 grand," said Rep. Xavier Becerra (D-Calif.), a Ways and Means Committee member whose Los Angeles district is populated by working poor. "We're trying to come up with a fix that does right by the great majority of Americans who fall into the middle class."

The debate has focused attention on a different surtax proposed by the Tax Policy Center, a joint project of the Urban Institute and the Brookings Institution. That plan would eliminate the AMT and replace it with a 4 percent surcharge on income over $200,000 for families and $100,000 for singles, cutting taxes for 22 million households and raising them for more than 3 million.

"Our plan is as simple as can be. And only 2 percent of the whole population would have to pay it," said Leonard E. Burman, director of the Tax Policy Center. The plan has the added benefit of abolishing the complicated AMT at all income levels, Burman said, an approach some lawmakers find attractive.

On the other hand, fewer families' taxes would be cut, diminishing the ability of Democrats to capitalize on the plan politically. Since they took control of Congress in January, Democrats have made repealing or scaling back the AMT a top priority in hope of establishing tax-cutting credentials and seizing the issue from Republicans for the 2008 campaign.

If those in charge of the 110th Congress want to revive memories of Walter Mondale, they are welcome to the consequences of that decision. But just because they choose to potentially wound themselves on the political front should not mean that the country has to pay on the policy front.

I have typed this out until I am blue in the face, but evidently, it needs reiterating: A whole host of countries are passing us by when it comes to reforming their tax systems. Former Eastern Bloc countries who once worshipped at the altar of sclerotic central planning and confiscatory revenue regimes now are implementing flat and consumption tax systems . . . and reaping the benefits. Meanwhile, we are falling further and further behind in the field of tax innovation thanks to our bullheaded insistence to both stick with a "progressive" tax system and our bizarre desire to engage in class warfare at the drop of a hat.

The country will suffer for this in the long term on the policy front. We deserve better than this desultory debate. And sadly, we won't get anything better anytime soon.