For Immediate Release
June 25, 2008 |
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FOR MORE INFORMATION:
Cullen Schwarz
Office: 202.225.4961
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House Approves
Middle Class Tax Relief |
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Over 800,000 Michigan Taxpayers Will Pay Higher Taxes This Year if an Alternative Minimum Tax Patch Is not Enacted |
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(Washington D.C.)- The U.S. House of Representatives today approved legislation to protect more than 25 million families from a tax increase under the alternative minimum tax (AMT). H.R. 6275, the Alternative Minimum Tax Relief Act of 2008, which would ensure that additional taxpayers, over 800,000 in Michigan, do not face a higher tax bill this year. The bill passed by a vote of 233-189.
“This legislation is critical to protecting hundreds of thousands of Michigan families from getting hit with a higher tax bill this year,” said Congressman Sander Levin, a member of the Ways and Means committee, which approved the bill last week. “Many families in Michigan are already struggling to afford rising gas and food prices. With the economic turmoil facing our state, we must protect middle income families from this tax that was never meant to affect them.”
The alternative minimum tax was originally passed in 1969 and was intended to stop a small number of wealthy individuals from avoiding paying any income tax by taking numerous deductions. However, as the AMT was never indexed for inflation, the tax will hit millions of middle class families this year if corrective legislation is not enacted.
H.R. 6275 is fully offset, that is, it is revenue neutral and will not add to the national debt. Rep. Levin authored the major offset provision in the bill. Levin’s measure would end an inequity in the tax code that allows wealthy investment fund managers to avoid paying income tax on “carried interest” compensation. In exchange for managing their investors’ assets, fund managers often receive a portion of the fund’s profits, or carried interest, usually 20 percent. Currently, fund managers are paying the much lower capital gains rate on this compensation rather than ordinary income tax rates, even though carried interest is money earned on a service provided, not money earned on fund managers’ personal investments. Levin’s provision ends this inequity and clarifies that carried interest is income and is subject to income tax.
“Congress must ensure that our tax code is fair,” said Rep. Levin. “Investment fund managers should not pay a lower tax rate on their compensation for services than other Americans. If you are investing your own money, you should receive the capital gains rate, but if you are providing a service, like managing other people’s money, you should pay the ordinary income tax rate like anyone else who provides a service. Fairness requires that fund managers be taxed at the same rate as any other American worker.
“Republicans say they do not want to pay for an AMT patch, but the reality is we pay for it one way or the other. We can pay for it by ending inequities in the tax code and making sure some are not avoiding paying their fair share, or we can borrow the money and pass the cost of our tax relief onto our children and grandchildren. Unlike the fiscally irresponsible approach advocated by Republicans, which has contributed to the explosion of the national debt in recent years, the bill to be considered is fiscally sound and is the best way to patch the AMT.”
For a summary of H.R. 6275, click here.
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