Congress battles over how to ax unwanted tax
WASHINGTON -- The congressional struggle over how to protect millions of middle-class people from getting soaked by the alternative minimum tax this year entered its final stage Tuesday as the Senate rejected a House demand that the $50 billion in tax relief be paid for.
The Senate voted 48-46 for the House-passed bill, well short of the 60 needed to advance the measure to shield 21 million from an average AMT bill of $2,000. The measure would have covered the cost of the lost revenue by closing a loophole on offshore tax havens.
With that vote, the House was scheduled to vote today on a Senate-passed measure that fixes the AMT for a year but provides no offsets to pay for it.
"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 said.
Republicans and the White House insist, because the AMT was never meant to affect millions of people, there is no need to raise taxes to pay for legislation to keep it from growing.
Senate Republicans used their filibuster powers to block the original House bill and President Bush threatened to veto any bill that included a tax increase.
The AMT fix was one of the last must-do pieces of legislation before Congress adjourns for the year.
Failure to enact AMT legislation before this session of Congress concludes this week would be a political disaster for both parties, but especially for majority Democrats. "If congressional Democrats leave town without preventing a massive and totally unnecessary tax hike on middle-class families, this will count as the most irresponsible -- and heartless -- act of this Congress," House Republican leader John Boehner said.
That wasn't going to happen. In a carefully scripted process, the Senate, at the urging of House Democrats, took up the House's paid-for AMT bill as an amendment to a massive, year-end spending bill package. With GOP opposition, that amendment faced certain defeat.
The consequences of the congressional dispute could be felt by millions. The Internal Revenue Service has said that it will take seven weeks from the time the bill is signed into law to reprogram and test forms, going well past the planned mid-January start of the 2008 filing season.
The IRS said Tuesday that it has yet to decide whether certain delays in processing returns and sending out refunds will affect just AMT taxpayers or all taxpayers.
House Democrats will still need help from Republicans to pass an unpaid-for AMT fix. The "Blue Dogs," a group of 47 fiscally conservative Democrats, have insisted that the House not relent on its "pay-as-you-go" rules that spending increases and tax cuts be matched by spending cuts or tax increases so as not to add to the deficit.
"We are standing strong in support of a fiscally responsible AMT bill," said Rep. Mike Ross, D-Ark., a Blue Dog leader.
The AMT was created in 1969 to make sure that a small group of very rich people did not totally avoid paying taxes. But the tax, which applies more stringent rules for using deductions in calculating tax obligations, was never adjusted for inflation, and every year more middle- and upper-middle-level income people are hit by the tax.
Congress has responded by passing annual fixes, or patches, to keep the AMT from affecting more people. Without a fix, taxpayers subject to the tax could grow from 4 million in 2006 to 25 million this year.
------
The bill is H.R. 4351.
------
On the Net:
Congress: http://thomas.loc.gov