Magazine article Nation's Cities Weekly

Congress Struggles to Reach Agreement on Tax Bill

Magazine article Nation's Cities Weekly

Congress Struggles to Reach Agreement on Tax Bill

Article excerpt

Last week, the House passed a bill that would create a one-year patch to the alternative minimum tax (AMT) and extend expiring tax provisions for one year.

The Temporary Tax Relief Act of 2007, H.R. 3996, introduced by Rep. Charles Rangel (D-N.Y.), chairman of the House Ways and Means Committee, would prevent the AMT, which is not indexed for inflation, from reaching 21 million more Americans in 2007 than it did in 2006.

The bill would also extend certain expiring tax credits and deductions, such as the deduction allowed to residents of states with no income tax for payment of state and local sales taxes.

Congress first enacted the AMT in 1969 to ensure that wealthy Americans could not escape taxation through the use of tax deductions.

Consistent with the House pay-as-you-go budget rules, Rangel included in the legislation offset mechanisms to pay for the $82.5 billion dollar impact the AMT relief and expiring tax provision extensions would create. The offsets are primarily raised by taxing the income of private equity managers, venture capitalists and certain real estate investors at ordinary income rates, instead of at the lower capital gains rate.

Senate leadership supports an AMT fix but disagrees with the need for an offset. In their view, because the AMT was never intended to reach so many Americans, no offset is necessary. The Administration issued a veto threat against the legislation and stated that imposing a tax increase on one group of taxpayers is not the appropriate way to protect 21 million additional taxpayers from the reach of the AMT. …

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