I admire the cleverness of Iowa Republican Senator Chuck Grassley's tax proposal. Bloomberg News reports that Grassley wants to introduce a bill that will link passage of a tax increase on private equity firms to an Alternative Minimum Tax (AMT) tax cut.

Grassley's proposal would increase from 15% to as high as 37.9% the tax rate that private equity firms pay on their profits with a measure shielding 23 million mostly middle-income households from an AMT increase this year. Unless Congress acts, the AMT will impose a $45 billion tax increase on 23 million households in 2007; permanently repealing the AMT would cost the government more than $1 trillion in revenue.

While it's not clear how much additional revenue the private equity tax rate increase would raise, the politics of the linkage is clever. That's because it will be hard for politicians seeking reelection to vote against a measure that could ease the lives of 23 million potential voters. If they happen to at the same time raise the taxes of those big campaign contributors, the need to help middle class AMT voters will offer the politicians some cover.

Peter Cohan is president of Peter S. Cohan & Associates He also teaches management at Babson College and edits The Cohan Letter.

The recent Barron's cover story which anointed Mitt Romney and Bill Richardson as the candidates best suited for investors contained this political propaganda: "Polls show that most Americans consider estate taxes to be unjust."

That statement is misleading.

The latest Gallup poll on the topic from 2000 showed that 53% of people surveyed didn't know enough about the estate tax to have an opinion. Once the issue was explained to them, 60% said they favored eliminating it though only 17% said they would personally benefit from such a move.

Exactly how this was explained isn't clear and a recent Yale University paper argued that people's opposition to the estate tax evaporates once they learn how few people actually pay the tax and the enormous $30 billion to $40 billion hole it would leave in the federal budget if it were repealed.

With the 2006 tax year filing deadline coming in a little over a week from now, have you done yours yet? This is the question I've been asked dozens of times in the last week, as taxes provide more water-cooler talk in the first few weeks of April than the final four of the NCAA tournament. The culprit? Anxiety would be my guess.

Anyway, the now-outmoded alternative minimum tax (AMT), created as a roadblock to tax avoidance by the affluent, is now trickling down to the middle class (and has been for years now). The AMT is a tax structure that disallows personal exemptions, the standard deduction or a host of other tax breaks that middle-income families enjoy under the regular tax code. For many single-earner or double-earner families, those exemptions and deductions can mean thousands of dollars in tax differences. These are no small potatoes to families that even make six figure incomes but have a huge tax burden due to the AMT.

Is it time to banish the AMT or re-structure it for current economic circumstances? This is being discussed in many circles, even in Congress. If the AMT is re-structured, which class of wage earners would it effect most? With the AMT tax affecting non-tax-avoiding citizens who just happen to live in states with higher state and local taxes, time has come for a change. Or (jokingly), states with higher state and local taxes could face a mass exodus of taxpayers to other states. Maybe another real estate bubble is on the horizon. Alright, enough joking. The AMT is all too serious.