The clock continues to tick on the Alternative Minimum Tax patch as this year comes to a close and weary legislators are anxious to get home to their families.
In a late night session on Tuesday, December 18, the Senate voted 48-46 in favor of a House bill that would halt the spread of the AMT to the middle class and increase taxes elsewhere to pay for the amount the Democrats are claiming the government will lose if the AMT is restricted. But 48 votes aren't enough to carry the measure (60 votes are needed), and so the ball bounces back to the House for additional debate on Wednesday.
The AMT controversy is following party lines. Democrats are calling the AMT patch a tax cut that will cost the government $50 billion next year and thus they claim that $50 billion has to come from somewhere else. Republicans are arguing that a) the patch protects the middle class from a tax that was never supposed to hit them, and that the money doesn't belong to the government in the first place, and b) President Bush's budget for 2008 doesn't include that $50 billion in revenue from the AMT and so raising taxes to increase revenue by $50 billion would be adding $50 billion in revenue to the budget.
Furthermore, Republicans have pointed out that while the AMT patch previously passed by the Senate is a one-year patch, the tax increases proposed by the House Democrats are permanent. If an offset to the AMT were truly required, it should only be a one-year offset and not a permanent tax increase.
The House legislation would permanently raise taxes on businesses and hedge fund operators to the tune of $50 billion per year, and would patch the AMT for 2007 only. President Bush has threatened to veto the House legislation that claims to be revenue-neutral.
House Democrats have expressed dissatisfaction with the Senate's performance on Tuesday night, but there are some Congressmen who are saying the House will protect the middle class taxpayers and, if necessary, pass what it considers to be non-revenue-neutral legislation in order to patch AMT for this year only.
"Democrats are determined to protect middle-class taxpayers from the AMT before we adjourn for the year, and we are very disappointed that Republicans continue to block responsible relief," House Majority Leader Steny Hoyer (D-MD) said.
Meanwhile, the clock is ticking at the IRS too, where 2007 tax return forms have yet to be printed, and where the agency is threatening to delay refunds as much as seven weeks in the spring due to the lateness of the AMT legislation.