November 9, 2007
Contact: Robin Winchell (202) 225-4031
WASHINGTON, D.C. - U.S. Rep. Charlie Melancon (D-LA) voted today in support
of tax relief for 194,068 Louisianians, including 28,120 in the Third
Congressional District. The Temporary Tax Relief Act (H.R. 3996) contains
must-pass provisions that provide Alternative Minimum Tax (AMT) relief and
extend a number of popular tax provisions set to expire this year. In
2006, about 4.2 million Americans paid the AMT. Without the Temporary Tax
Relief Act, passed by the House today, 23 million Americans will pay higher
taxes in 2007. The IRS's National Taxpayer Advocates estimates that
the average AMT taxpayer will owe an additional $6,782 in tax. The bill
passed the House by a vote of 216 to 193.
"Hardworking Louisianians already
pay too much in taxes, and this bill ensures that they won't get hit with a
huge, unexpected tax hike next year," Rep.
Melancon said. "As a fiscal conservative, I am also pleased that the
cost of this tax relief is being fully paid for with offsets, instead of
saddling future generations of Americans with even more debt. This bill
gives tax relief to middle class families by closing a loophole that allows
Wall Street millionaires to avoid paying their fair share of taxes. The
Temporary Tax Relief Act will protect almost 200,000 Louisianians from a
massive tax increase next year, and I am proud to support it."
Introduced by the Tax Reform Act of 1969, the AMT sets a
minimum tax rate of either 26% or 28% (depending on the amount of the
taxpayer's "alternative minimum taxable income," as adjusted) on some
taxpayers so that they cannot use certain types of deductions to lower their
tax. By contrast, the rate for a corporation is 20%.
When it was created, the AMT was intended to target 155
extremely high-income households nationwide that had been eligible for so many
tax benefits that they owed little or no income tax under the tax code of the
time. However, because the AMT is not indexed to inflation and recent tax
cuts, an increasing number of middle-income taxpayers have been finding
themselves subject to this tax.
In 2006, the IRS's National Taxpayer Advocate's report
highlighted the AMT as the single most serious problem with the tax code. The
advocate noted that the AMT punishes taxpayers for having children or living in
a high-tax state, and that the complexity of the AMT leads to most taxpayers
who owe AMT not realizing it until preparing their returns or being notified by
the IRS.
The Temporary Tax Relief Act also
includes an increased refundable child credit. Under current law, a family earning less than $12,050
would not be eligible for the child tax credit next year. The bill lowers the
eligibility threshold in 2008 to $8,500. For a single mother working fulltime
in a minimum wage job, the bill would mean the difference between a child tax
credit of just $35 and a credit of $568.
The Temporary Tax Relief Act is offset by closing a loophole
in the tax code to treat the "carried interest" received by investment fund
managers as ordinary income rather than capital gains. In exchange for
managing their investors' assets, fund managers often receive a portion
(usually 20%) of the fund's profits. H.R. 3996 clarifies that this income
is compensation for services rather than investment income and is subject to
ordinary income tax rates (up to 35%) rather than the much lower capital gains
rates (only 15%).
In other words, fund managers would pay the same taxes on
their income that teachers, nurses, and other workers pay on their income,
rather than the lower rate that investors pay on the profits from the
investments.
The bill also extends a deduction for property taxes paid by
homeowners. A summary of the tax relief offered in this bill can be found
here: http://waysandmeans.house.gov/media/pdf/110/Summary%20for%20Distribution2.pdf.
Briefly, the bill would:
Cut Taxes for Millions of
Middle-Class Families
-
Protect 23 million middle-class families from being hit by
the Alternative Minimum Tax;
- Provide 30 million homeowners with property tax relief;
- Help 12 million children by expanding the child tax credit;
- Benefit 11 million families through the State and
local sales tax deduction;
- Help 4.5 million families better afford college with the
tuition deduction;
- Save 3.4 million teachers money with a deduction for
classroom expenses; and
- Provide thousands of American troops in combat with tax
relief under the Earned Income Tax Credit.
Restore Tax Fairness
-
Close 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.
- Stop 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.
Ensure Fiscal Responsibility
- Protect future generations by not asking them to finance
current tax cuts. Recent fiscal policies have resulted in $9 trillion of
national debt, with an average daily interest payment of more than $1
billion. Each American's share of this debt exceeds $30,000 per
person.
Grow the Economy
-
Extend the R&D tax credit to promote innovation and
high-paying jobs.
- Provide tax relief to millions of homeowners suffering from
the current housing crisis.
- Ensure long-term economic growth by adhering to
pay-as-you-go budget rules. These rules helped produce record budget
surpluses and a robust economy in the 1990s by mandating no new deficit
spending.
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