This week, House Ways and Means Committee Chairman Charles B. Rangel (D-NY) introduced the AMT Relief Act of 2007, new legislation that would provide a one-year fix to the alternative minimum tax (AMT) currently poised to affect an estimated 23 million taxpayers.
Congressman Rangel's bill, H.R.4351, passed in the House at 6:45 p.m. Wednesday, December 12, with a vote of 226-193, with three Democrats crossing party lines to vote with Republicans in opposition to the bill.
Chairman Rangel’s bill offers a response to Senate legislation that would provide AMT relief without adding to the national debt. Chairman Rangel’s legislation removes provisions that would tax carried interest of private equity managers at ordinary income rates instead of the current capital gain tax rates, but would retain the provision to close a tax loophole that allows hedge fund managers to defer taxes by sheltering their pay in offshore tax havens. Rangel's bill includes a tax cut to millions of families by enhancing the refundable child tax credit, estimated to help more than 12 million children nationwide. Other provisions in the bill would raise taxes to businesses.
"Senate Republicans have defined themselves as an obstacle to providing responsible AMT relief, suggesting that provisions in previous legislation were too controversial to pass Congress this year," said Chairman Rangel. "This new bill removes those controversial pay-fors, and incorporates provisions that have been suggested to receive broad support in the Congress. The House will consider and pass this legislation [Wednesday], giving the Senate one more chance to do the right thing and pass this critical tax relief without adding to the deficit.
The White House has threatened to veto the proposed House legislation, and the Senate leadership has indicated this latest House legislation is unacceptable. "The Senate will not pass a short-term fix for some, if it includes a permanent massive tax hike for others," said Sen. Mitch McConnell (R-KY).
Democrats and Republicans in both chambers have agreed that an AMT fix before year-end is imperative, however Democrats in the House continue to push for revenue-neutral legislation, whereas the Senate has passed an AMT fix that would not be paid for with other tax increases. Without the AMT fix, the federal government would enjoy an additional $50 billion in revenue in 2008 with the AMT set to affect over 20 million taxpayers with income in the $75,000 to $200,000 range with an average expected increase in 2007 taxes of $2,000 per family.
Meanwhile, the IRS is standing by, noting that each day of legislative delay will delay the processing of tax returns and refunds in the spring of 2008.
White House press secretary Dana Perino stated today that President Bush supports removal of the AMT altogether, and short of that, recommends a one-year patch that would add to the deficit. "The President is against raising taxes," said Perino in a White House press conference. "What he would be willing to discuss are cuts in the budget. The President is not going to raise taxes on the American people. It's especially wrong at this time when we're facing a headwind from the housing market and we have a credit crunch that we're trying to deal with."
The House is expected to pass Rangel's latest legislation, and the bill is expected, once again, to die in the Senate.