Tax hike on middle class averted—for now

On Wednesday, Congress approved a measure that will prevent millions of middle-class taxpayers from being slapped with additional taxes on their 2007 incomes. President Bush has said he will sign the bill into law.

Had Congress not acted, 21 million filers, almost all of them in the middle income range, would have experienced an increase in their income taxes due to the so-called “alternative minimum tax,” a parallel tax calculation system that operates alongside traditional tax brackets. The AMT, as it is commonly known, was created in 1969 to prevent certain very wealthy investors from using loopholes in the tax code to escape taxation altogether. But because it was not indexed to inflation, the AMT now applies to many middle-class taxpayers as well.

That Congress and the President have staved off this de-facto tax hike on the middle class is good news. But debate surrounding the bill was marred by nasty partisan squabbling, and it was decided that it should only be valid for one year. Will it be possible to form a consensus again next year, when the AMT comes roaring back, and threatens to ensnare even more taxpayers? We shall see…