Make no mistake: no one says they want that to happen. But it is one thing to rein in or eliminate the tax itself, and an entirely different matter to give up the money that it would generate.

President Bush has promised to fix the alternative minimum tax as part a fundamental overhaul of the tax code, and he has ordered a bipartisan advisory panel to come up with recommendations by the end of July.

But in giving the panel its marching orders, White House officials made it clear that they are counting on the extra money regardless of what happens to the alternative tax. Under the president’s instructions, the panel’s recommendations on addressing the alternative minimum tax are supposed to be “revenue neutral,” neither raising nor lowering taxes, and to assume that his income-tax cuts will be made permanent rather than expire in 2010, as required under current law.

…Tax experts have long complained that the alternative minimum tax is a “stealth tax increase,” one that Congress never intended and that is likely to catch millions of taxpayers by surprise. But a tax increase through tax reform could be even stealthier. If the alternative tax is reduced, the offsetting revenue increases are likely to be buried in so many other changes that most people would never know what hit them.

Seen or unseen, the looming tax increases are almost as large as the president’s tax cuts. Leonard E. Burman, a senior fellow at the Urban Institute, estimated that the government would have to raise ordinary income tax rates substantially in every bracket to offset the money lost in each bracket by the elimination of the alternative minimum tax. People in today’s 28 percent bracket, for example, would have to pay a top rate of 35 percent. Those who now pay a top rate of 33 percent would pay 41.4 percent.

In short, Bush’s tax cuts have had such a profound effect on the government’s finances that he needs the AMT revenue, or some substitute, to keep the government anywhere near fiscal balance. And so he’s going to take back a significant portion of the tax cut via some revenue-neutral AMT fix.

The irony is that this is just like the “clawback” for private account holders under Bush’s Social Security plan. Consider the parallels. Private accounts divert so much revenue from the Social Security system that the government has to take back 3% above inflation annually in interest, which means that they’re actually a lousy deal when you consider the added risk from private investments. And Bush’s tax cuts divert so much revenue from the federal treasury that he’s now having to claw back hundreds of billions of dollars via a revenue-neutral AMT fix, which will probably have the effect of shifting more of the tax burden onto the middle class. What a mess.