HOUSE DEMOCRATS PASS ALTERNATIVE MINIMUM TAX RELIEF

Friday December 14, 2007 Joseph O'Brien
HOUSE DEMOCRATS PASS ALTERNATIVE MINIMUM        TAX RELIEF
Rep. Engel:  Protects over 38,000 families in my District


Washington, D.C.--With Congressman Eliot Engel voting an emphatic yes, House Democrats passed legislation to save 23 million American families, including over 38,000 in his Congressional District, from paying higher taxes because of the Alternative Minimum Tax (AMT). 

H.R. 4351, the AMT Relief Act of 2007, passed by a vote of 226 to 193 in the face of strong Republican opposition.

Rep. Engel said, “For the past few years only the wealthiest Americans got real tax relief, thanks to the Republican-led Congress.  Now the Democratic majority is working for the middle class.  This legislation would provide essential tax relief to working families and provide Alternative Minimum Tax relief to over 23 million American families, including the more than 38,000 in my district.”

The original idea behind the alternative minimum tax was to prevent people with very high incomes from using special tax benefits to pay little or no income tax.  The AMT’s reach, however, has expanded beyond just the wealthy to threaten millions in the middle class.  And when the AMT applies, its costs are often substantial.  

One reason for the AMT’s expansion is that, unlike the regular income tax system, the AMT is not indexed for inflation.  Another reason is that individual income tax cuts enacted since 2001 have provided higher credits and deductions and lowered tax rates, thereby leading to more taxpayers owing tax under the AMT.  

According to the New York City Independent Budget Office, the percentage of New York City taxpayers currently hit by the AMT far exceeds the comparable national estimate:  6.7 percent versus 4.0 percent.

This bill freezes the AMT for one year, preventing it from expanding beyond its current reach today.  Specifically, H.R. 4351 would extend for one year AMT relief for nonrefundable personal credits and increase the AMT exemption amount to $66,250 for joint filers and $44,350 for single filers to ensure that no additional taxpayers are liable for the AMT this year. The legislation would also increase the eligibility for the refundable child tax credit in 2008 by lowering the income floor for qualification to $8,500.

In addition to ensuring that no additional taxpayers pay the AMT this year, H.R. 4351 would also (i) expand the refundable child tax credit to provide relief to more than 12 million children; (ii) close the loophole that allows hedge fund managers to defer compensation in offshore accounts; (iii) delay implementation of worldwide allocation of interest; (iv) clarify the economic substance doctrine; (v) create uniform penalty for failure to file partnership and S corporation returns; (vi) increase information return penalties; and (vii) increase general failure to file return penalties by taking inflation into account.

Rep. Engel said, “The legislation reverses years of failed Republican policies that have mortgaged our grandchildren’s future with additional foreign-owned debt. It will protect future generations by preventing them from having to pay for the tax cuts for the wealthy.  Republican priorities have resulted in $9 trillion of national debt, with an average daily interest payment of more than $1 billion. Every American’s share of this debt exceeds $30,000 per person.”

The bill adheres to pay-as-you-go or “paygo” budget rules adopted by Congress earlier this year. Paygo requires that new mandatory spending and tax cuts be paid for with revenue increases or spending cuts. To pay for improvements to the AMT, the bill closes tax loopholes that allow the privileged few on Wall Street to pay a lower tax rate on their income than other hardworking Americans, such as teachers and firefighters.  It also stops hedge fund managers and corporate CEOs from escaping income taxes by using offshore tax havens as unlimited retirement accounts, while middle-class families play by the rules and pay their fair share of taxes.  

Rep. Engel said, “The bill before us today provides a much needed one-year patch for the AMT.  It is a necessary step in the right direction on this issue; and we completely pay for it.  The Democratic majority has the courage, the wisdom, and the good common sense to pass this legislation.  I remain hopeful we can see swift enactment of this needed tax relief.”

The bill now goes to the Senate where it also faces strong Republican opposition.

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