By Stephen Cooper, Washington Staff Writer
The House of Representatives has temporarily curtailed a tax increase that was never supposed to be levied, but has permanently instituted a new tax to replace it.
Republican lawmakers were unsuccessful in their attempt to stop House passage of the Temporary Tax Relief Bill of 2007 on November 9, 2007. GOP lawmakers said they wanted the House to provide $50 billion in tax relief from the alternative minimum tax (AMT), but they did not want a corresponding increase in taxes to pay for it. However, House Ways and Means Chairman Charles B. Rangel (D-N.Y.) said Democrats were committed to following House Pay-as-you-go (PAYGO) rules that require that any tax cut be offset.
The AMT bill, which also extends a popular group of expiring tax provisions known as the extenders, passed the House by a vote of 216 to 193. The bill now heads to the Senate where Republican lawmakers have promised to kill the legislation and pursue AMT relief without a tax increase.
Under the House measure, the tax relief would be offset by increasing the tax burden on investment managers who currently pay taxes at the capital gains rate of 15 percent rather than the ordinary income tax rate of 35 percent. This so-called carried interest provision has drawn the ire of House and Senate Republicans who said it would cripple America's economy, while instituting a permanent tax increase to pay for temporary AMT tax relief.
During debate on the House floor, Rangel chided GOP lawmakers for their lack of fiscal discipline. Rangel said Congress is obligated to replace that AMT revenue in the budget with either a tax increase or a decrease in federal spending. The Democratic majority chose a tax increase.
"I don't think the 23 million families facing a tax increase this year (without the AMT relief) care who is right or wrong. They care that we did the right thing and gave them relief," Rangel said. "(Republicans) believe you can simply borrow the money and the problem disappears, but the fact of the matter is - any responsible budget office will tell you that if you're going to lose $50 billion, you have to make that up somewhere, or that is called debt."
Senate Finance Committee ranking Member Charles Grassley (R-Iowa) urged the House and Senate leadership to put aside the House bill and work on a measure that President Bush will sign. He said Republican lawmakers will not accept the tax increases in the Rangel bill, and that time is running out before millions of taxpayers will be hit with the AMT. "We need to put the needs of 50 million hard-working, taxpaying American families and individuals above partisan politics," he said.
House Ways and Means Rep. Phil English (R-Pa.) agreed with Grassley's assessment, noting that despite the House action, the bill will be dead on arrival in the Senate. "Despite the bleak future of this measure, the House Democratic leadership still moved forward with the bill, further delaying congressional action on the AMT," English said. "As a result, 50 million taxpayers could find their refunds delayed next year by up to 10 weeks."
- Related items:
- Congress Begins Work on Temporary AMT Patch, Extenders Bill
- Year-End Tax Planning Must Deal with Uncertainty
- Tax Rate Projections for 2008
- Senate Finance Panel Hears Solutions for AMT Problem
- IRS Begins Tax Season With Important Issues Unresolved
- Permanent AMT Fix Poses Difficult Choices
Posted November 16, 2007.
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