Lawmakers vow to pass AMT fix before year-end
Late last week the Senate passed legislation to halt the impending increase in the Alternative Minimum Tax, currently poised to affect more than 23 million Americans on their 2007 income tax returns.
The Senate legislation is in direct contrast to legislation passed earlier in the House, the large difference between the two factions being the reaction to the philosophical intent of the AMT.
The House has taken the position, a stand taken by Democratic legislators who were voted into office a year ago, that any legislation that changes the amount of tax collected will be offset by legislation that will pay for the change. Thus, the House AMT legislation includes offsets that will draw tax dollars from other sources so there will be no change in the government coffers when the AMT fix goes into place.
Alternatively, the Senate has taken the position that the impending windfall profit the government would receive from the AMT is not money to which the government is entitled in the first place, and thus no offset is necessary. So there is no offset in the Senate legislation, simply a one-year patch that will keep the AMT off the backs of middle-class taxpayers who make $100,000 or more.
President Bush and the U.S. Treasury are pressuring Congress to get this legislation passed before Congress retires for the holiday break, but the President has indicated he will not sign legislation that includes offset that the House wants to tack on. The House is expected to address the measure this week.
Analysts are predicting that the House will pass AMT legislation this week without an offset. Without the fix, millions of taxpayers will see an average increase of $2,000 in tax for 2007.
The AMT was created to ensure that a small group of extremely wealthy people couldn't use tax breaks or deductions to eliminate their entire tax bill. But because the AMT wasn't indexed to inflation, the number of people being subjected to the tax has risen each year and Congress has passed annual fixes to keep the tax away from the majority of taxpayers.
Meanwhile, the Treasury has indicated that even if AMT legislation at this late date in the calendar year, tax refunds next spring will likely be delayed due to the fact that the IRS will need to rework forms and calculations, which will delay the mailing of tax forms and the start of tax processing in January.