House passes AMT legislation - Bush says he will sign
Late Wednesday afternoon, the House of Representatives voted 352-64 to approve a bill that will patch the Alternative Minimum Tax for one more year, protecting more than 20 million taxpayers from an estimated average tax increase of $2,000 next spring when they file their 2007 individual income tax returns.
House Democrats who were holding out for a revenue neutral plan that would reimburse the government for taxes lost through the AMT fix by raising taxes elsewhere finally gave in, recognizing that a simple AMT patch with no offsetting tax increase was the only alternative that would be signed into law in 2007. President Bush had been adamant in his unwillingness to sign any legislation that includes a tax increase, and therein lies the debate.
Democrats claim that the AMT patch is actually a tax cut, and, to make things even, taxes must be raised somewhere so that there is no change in anticipated tax revenue in 2008. Republicans, on the other hand, have taken the stance that implementing a tax that didn't exist previously represents a tax increase, and therefore not patching the AMT would constitute a tax increase.
In the end, both parties agreed that they could postpone quibbling over tax increases and a permanent fix for the Alternative Minimum Tax to next year, but for now, the middle class will not be pleased if they are hit with surprise tax increases next spring, and so the AMT patch with no strings attached was passed as our Congressmen and women and Senators get ready to head home for the holidays.
Meanwhile, there are many people at the IRS who won't be hurrying home for the holidays but who will instead be cranking out tax returns and getting the agency's computer system ready to handle tax returns right after the first of the year. Treasury Secretary Henry Paulson predicts that the lateness of this legislation will cause delays in tax processing come January.
"The IRS is doing all it can to have a fully successful filing season," Paulson said in a statement. "However, it is likely that there will be some delays, including delays of some refunds. The Treasury Department and the Internal Revenue Service will do everything possible to keep American taxpayers informed throughout the course of the upcoming filing season."