Alternative Minimum Tax Relief Act
On June 25, 2008, the House passed the Alternative Minimum Tax Relief Act, H.R. 6275, to provide millions of middle-class families with tax cuts without increasing the national debt. These middle-class tax cuts will help to ease the strain of rising gas and food prices and are a critical part of our plan to grow the American economy, which is on the brink of recession. Failure to pass this legislation would result in more than 25 million families facing a tax increase this year.
The bill is fully paid-for by closing tax loopholes that allow the privileged few on Wall Street to pay a lower tax rate on their income than other hardworking Americans, encouraging tax compliance, and repealing unnecessary government subsidies for the big five oil companies reaping record profits. It ensures 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.
Seven years of Republican policies have resulted in $9 trillion of national debt, with an average daily interest payment of more than $1 billion– passing debt instead of prosperity onto our children and grandchildren. This has been bad for the economy -- weakening the value of the dollar, raising the cost of oil and food for American families and businesses, and limiting our ability to meet the economic challenges we are facing today.Cut Taxes for Millions of Families
Protects more than 25 million middle-class families from being hit by the AMT. The bill would extend for one year AMT relief for nonrefundable personal credits and increases the AMT exemption amount to $69,950 for joint filers and $46,200 for individuals. The AMT was put into place to ensure that the wealthiest families did not escape paying taxes altogether. It has grown to be such a problem that it now threatens teachers and firefighters – a far cry from its original intent.
Will Not Grow the Deficit
Closes tax loopholes that allow a privileged few to pay a lower tax rate on their income than other hardworking Americans, such as teachers and firefighters. Under the bill, investment fund managers would no longer receive a lower capital gains rate of 15 percent for what is essentially payment for services, and instead would pay ordinary tax rates. The bill would not affect the tax rate on profits that fund managers make on investments with their own money and would not affect the other investors in these funds. Most economists, including Greg Mankiw, former chair of the Council of Economic Advisers under President Bush, tax officials in the Bush and Reagan Administrations, and the Congressional Budget Office have said that carried interest should be taxed at the same rate as other compensation for such services.
“The bill would not affect the other investors in these funds, nor would it affect the tax rate for profits that fund managers make on investments with their own money… Critics of the two bills argue that investment fund managers should be rewarded for taking high risks. But these fund managers, for the most part, are not risking their own money… Besides, plenty of risky industries don't enjoy comparable tax benefits. Income earned from managing an investment partnership fund should be treated just like the income earned for providing any other service.” [The Washington Post, 7/13/07]
Includes scaled-back provision closing manufacturing tax subsidy for large oil companies. The bill includes a scaled-backed provision that would eliminate a subsidy in the 2004 international tax bill (H.R. 4520) for major integrated oil and gas companies. Small, independent oil and gas companies would continue to benefit from the deduction at the current rate. These provisions are narrowly targeted toward the large integrated oil companies that are currently reaping record profits paid for by the American people.
Encourages tax compliance by requiring credit card companies to report more information to the IRS about purchases at merchants. The bill would enact the President’s proposal to require institutions that make payments to merchants in settlement of payment card transactions to file an information return with the IRS. According to the Treasury Department, “Payment cards (both credit cards and debit cards) are an increasingly common form of payment to merchants for property and services rendered. Some merchants fail to report accurately their gross income, including income derived from payment card transactions. Generally, compliance increases significantly for amounts that a third party reports to the IRS.”
Tightens rules on foreign-owned companies using tax treaties to reduce U.S. taxes. This legislation would eliminate a tax-planning loophole that allows foreign corporations established in tax haven countries to dodge American taxes by routing payments to subsidiaries in countries where we have a tax treaty before they send the funds to the actual parent corporation in the tax haven country. The United States has entered into tax treaties with many foreign countries -- reducing U.S. tax withholding for foreign persons from the treaty country -- to prevent double taxation of income earned by residents of the treaty countries.
- No U.S.-based companies would be affected and foreign multinationals would not be affected if they are organized in countries with which we have a tax treaty.
- This proposal will level the competitive field for American companies that play by the rules.