Senate OKs Curb On Alternative Minimum Tax

Bill Now Returns To House, For Dogfight On How To Fund It

(AP)  The Senate voted Thursday to block a looming tax increase averaging $2,000 for millions of taxpayers after Senate Republicans succeeded in thwarting a Democratic plan to also raise taxes on investors.

The Senate bill, passed 88-5, provides a one-year fix for the alternative minimum tax but without matching the cost of the tax relief with new tax revenues. Without the fix, an estimated 25 million people would be subject to the higher AMT tax, up from 4 million in 2006.

The Senate vote puts it at odds with the House, where Democratic leaders, under a principle of not adding to the national debt, demanded that the AMT fix be paid for. Last month, the House passed legislation matching the AMT fix and other tax cuts with about $80 billion in new tax revenues.

Senate Finance Committee Chairman Max Baucus, D-Mont., said it was not his first choice to pass an unpaid-for bill but "this is our best choice." He said 12 million people in the $100,000 to $200,000 income level alone would be hit by the AMT without the fix, and "we need to stop that from happening."

The bill now goes back to the House, where Rep. Charles Rangel, D-N.Y., chairman of the tax-writing Ways and Means Committee, suggested making up the difference by closing a loophole on offshore funds that now escape taxation.

Senate Majority Leader Harry Reid, D-Nev., said after the vote that he had heard the House would accept the Senate version. But Rangel said the House would "give the Senate another chance to do the right thing and pass responsible AMT relief."

The White House, in a statement, praised the Senate action. "We encourage the House of Representatives to swiftly pass this bill to stop this tax increase and to prevent a costly delay in refunds."

Earlier Thursday, Senate Republicans united in stopping the Senate from moving to the House-passed bill. The vote was 48-46 against beginning debate on the House bill, 14 short of the 60 needed.

The Finance Committee's top Republican, Charles Grassley of Iowa, said it was time for Democrats to abandon their "PayGo obsession," referring to the "pay-as-you-go" principle that tax cuts or spending increases should be paid for so as not to add to the federal deficit. With the "clean" AMT bill, "the Senate Democratic leadership seems to realize that the AMT should not be offset," he said.

House Democratic leaders throughout the day Thursday reaffirmed their commitment to PayGo.

Republicans, said House Majority Leader Steny Hoyer, "complain that we pay for this legislation by closing tax loopholes. Their solution? Just add the costs of the AMT fix ($50 billion) to the deficit and national debt. I absolutely reject this fiscally irresponsible approach."

Without congressional action, the IRS, unsure of the final status of the tax, says it may have to postpone the processing of returns scheduled to begin in mid-January. That could mean delays for millions of people waiting for income tax refunds worth billions of dollars. The tax agency says it will take about seven weeks after the tax is revised to reprogram and test forms reflecting the changes.

For weeks, Democrats and Republicans have blamed the intransigence of the other party for the delay. "The Democrats' unprecedented and indefensible delay on this commonsense solution means the filing season will already be disrupted," Senate Republican leader Mitch McConnell, R-Ky., said.

"They find it offensive to have to pay for these tax cuts," Reid said of Republicans. "This is a $50 billion patch. Shouldn't it be paid for? The answer is obviously 'yes."'

The AMT was created in 1969 to ensure that a small number of wealthy people could not use tax breaks or deductions to eliminate their entire tax bill. But the tax was not indexed to inflation, and every year more people are exposed to it. Nearly 4 million taxpayers were subject to this tax in 2006, and the number is expected to multiply in 2007.

Baucus likened the AMT to Frankenstein, saying that "unless we act it will destroy the entire tax system."

Congress has reacted by passing annual fixes to prevent the number of people subjected to the AMT from growing.

This year, however, the first with Congress under Democratic control, that fix has been blocked by a fundamental difference between the two parties over whether to find ways to pay for revenues lost from the anticipated expansion of the AMT.

House Democrats, committed to offsetting any lost revenues, passed a bill that included $80 billion in new tax revenues, $50 billion for the one-year AMT patch and $30 billion to extend several dozen tax credits about to expire.

Baucus has proposed a compromise under which there would be no offset for the AMT but there would be new taxes to fund a two-year extension of the tax credits.

The "Blue Dogs," a coalition of 47 fiscally conservative House Democrats, issued a statement Tuesday urging Democrats to hold their ground. "We made a commitment to the American people to reinstitute 'PayGo' budget rules and restore fiscal responsibility to government, and we will stand by that commitment."

House Speaker Nancy Pelosi said Thursday she fully supported that position.

The Senate bill leaves for later consideration what to do about the several dozen targeted tax breaks. The House bill would expand the child tax credit, providing a property tax deduction to some 30 million families, extend a tax exemption for the combat pay of military personnel and extend tax breaks for teachers and research and development.

[rowdytexan2]

The republicans just love to propose these tax cut issues so as to cut the government from #1 allowing people to help each other because they want to keep us in poverty, and #2 to cut funds to government agencies that oversee and regulate big business.

When they sold us de-regulation under the delusion that less government meant more money for the people, what in fact happened, was that it just allowed big business to charge us whatever they want to and make full profit, instead of a fair profit margin. It means that the people have to cover their investment in total. And they wind up with huge assets in fact paid for by the people. And allows them to amass even more wealth. This ''more wealth'' has allowed them the tools of bribery and intimidation of our government and total power. The free people of our country have, in fact, been rendered helpless against it.

Until we rise up and exercise our right to self govern, and make big business live off the ''income'' of their investment, like we have to there will be no end to the destruction of the middle class and become an elitest''s serfdom.

[forthepeopl1]

it''s so funny that they think that this all that has been destoyed by the bush adminastration(cheney) everyday they do it. and for our congressman and woman and senators to be suprised that this happen is killing me i cant stop laughing, boy do we have a stupid and so blind goverment

Senator Edward M. Kennedy of Massachusetts, a persistent critic of the Bush administration''s anti-terrorism policies, was to speak on the Senate floor about the destruction of the interrogation tapes, and its not having been revealed for some two years. At least one Republican lawmaker has also expressed dismay over the destruction of the tapes.

The CIA''s destruction of the tapes came in the midst of Congressional and legal scrutiny about its secret detention program, according to current and former government officials.
White House officials declined this morning to comment on the matter.

"This matter must be promptly and fully investigated," said Harman, now head of the Homeland Security subcommittee on intelligence and terrorism risk assessment. She noted that in early 2003 she received "a highly classified briefing" on CIA interrogation practices from the agency''s general counsel, and that she had expressed "serious concerns" in a letter to the lawyer afterward.

"I call for my letter of February 2003, which was never responded to and has been in the CIA''s files ever since, to be declassified," the Congresswoman said.

[seekingsense]

I think most politicians try to do what they think is right, based on what they understand and value. Its politics that there is competition to drive the outcome, and politicians will frame things to aid their preference. There will always be some that occasionally misuse things.

PayGo intrinsically sounds sensible. A tax cut needs a balance, HOWEVER it does NOT need to be a new tax, it could be a spending cut! It is easier to write up a new tax than to analyze what to cut. Cuts are better looked at in a more comprehensive program to trim spending in a reasoned balance analysis, than slapping it on a tax cut bill. I can see why some may oppose paygo for that reason, not because they are irresponsible.

Generalizing, Dems tend to focus on helping and paying to care for people, and Repubs tend to focus on setting incentive frameworks for people to decide how best to help themselves. Obviously there are always those that will need help provided, and both parties address that in some way. But the Repubs'' method is a longer term solution driven by free markets, compared to the Dems'' method.
With long term solutions, there is almost always a cost up front and a delay in benefit, but a bigger benefit later. Critics will always highlight the up front cost. There needs to be some long term solutions and some short term solutions.

Come on, political leaders, try to intentionally use a mix of your best ideas cooperatively.

[bookwerm314]

I want the AMT tax "cut" balanced with taxes elsewhere, and fully support "PAYGO". I am very disappointed that the losers that CALL themselves Republicans (really are LIEpulicans) are NOT fiscally responsible, not the party I want to be in anymore if THAT is what it means to be "Republican". I use quotes because they may be called that, but they aren''t.. they lie, they don''t pay their way, they give tax cuts to whoever buys them off. NOT the party it once was, or it says it is!

Any others on here that think Republican is not "Republican"? That the ones that call themselves Republican are NOT representing Republican values (for the most part) such as balanced budget, fiscal responsibility, and reason? That you are disappointed in them? I sure am.

[mudrose-2009]

When have the dems IN Congress been good for the economy?

Posted by smiley676

During the Time of Socrates and Plato?

[mudrose-2009]

Yeppie! I get to pay my real estate taxes with my income taxes. Yeppie! Nothing like being able to give your federal return to state and local government for the privilege of owning a home.

[sgtrds]

Another bill the republicans want to pass on to our kids and grand kids. Of course with Bush''s tax cuts for the rich their kids won''t have to pay a nickle more in the future. And besides even if we reverse those cuts Bush and Cheney''s kids have plenty of blood money they''ve stolen from the Treasury to cover it.

[radiob-2009]

America today one of the multiple issues that confront it, important yes but dwarfs compared to the US economy which none of the candidates are truly addressing. Our nation jobs have been outsourced through tax credits elimination of tarriffs and none of the politicians have addressed the multiple free trade agreements or the tax decreases that have allowed US corporations to move or outsource US jobs overseas.

[bob301540]

Its apparent most of the people that have submitted comments don''t have the slightest clue what it cost to support a family these days. Making between 100 and 200k does not mean you are rich. It is Also sad that liberal''s think that when a person receives a tax break it is money taken away from the gov''t (politician scum) and not the person''s own money returned back to them.

[omega39-2009]

When have the dems IN Congress been good for the economy?

Posted by smiley676

Every time they are in power.

http://arts.bev.net/roperldavid/politics/scores.htm