House Plans Vote To Stave Off Expansion Of Alternative Minimum Tax

Wednesday, December 19th 2007, 7:23 am

By: News On 6

WASHINGTON (AP) _ After agonizing for weeks, the House planned to vote Wednesday on legislation that would protect more than 20 million people from seeing their tax bill balloon this year as a result of the dreaded alternative minimum tax.

One of Congress' last acts before it closes shop for the year, passage of the bill providing a one-year stay on growth of the AMT was a political must: Neither party wanted to leave Washington taking blame for a tax increase, averaging $2,000 a person, that would affect millions. House passage would send the bill to President Bush.

The last-minute nature of the vote on the AMT fix resulted from a fundamental difference between the House and Senate. House Democrats had insisted that the $50 billion in tax relief resulting from the one-year fix must be paid for by an equivalent amount of revenue elsewhere, mainly by closing a loophole on offshore tax havens.

Senate Republicans, however, have blocked the Senate from taking up legislation that includes a tax increase, and Bush threatened to veto any bill that raised taxes.

On Tuesday night the Senate for a second time rejected the House-backed approach of a paid-for AMT bill. The House Democratic leadership, which was committed to paying for the tax relief, had asked the Senate to make one last stab at the issue. The Senate vote was 48-46 for the House bill, 12 short of the 60 needed to approve it.

With that vote, the House had no choice but to take up the Senate bill, which shields some 21 million taxpayers without a means to cover the cost to the Treasury.

``Let me be clear, there is no disagreement between Republicans and Democrats over protecting the middle class from the AMT,'' House Majority Leader Steny Hoyer, D-Md., said. ``The question is, will we do so responsibly or charge tens of billions of dollars to our grandchildren?''

The AMT was created in 1969 to make sure that a small group of very rich people did not totally avoid paying taxes. But the tax, which applies more stringent rules for using deductions in calculating tax obligations, was never adjusted for inflation, and every year more middle- and upper-middle-level income people are hit by the tax.

Congress has responded by passing annual fixes, or patches, to keep the AMT from affecting more people. Without a fix, taxpayers subject to the tax could grow from 4 million in 2006 to 25 million this year.

Even with House passage of an unpaid-for bill, the consequences of the congressional dispute could be felt by millions.

The Internal Revenue Service has said that it will take seven weeks from the time the bill is signed into law to reprogram and test forms, going well past the planned mid-January start of the 2008 filing season.

The IRS said Tuesday that it has yet to decide whether certain delays in processing returns and sending out refunds will affect AMT taxpayers or all taxpayers.

The Democratic majority in the House needed the support of Republicans, who in the past have voted unanimously against raising taxes to pay for the AMT. Many Democrats, led by the fiscally conservative ``Blue Dogs,'' said the House should not bend on its ``pay-as-you-go'' principle that requires all tax cuts or mandatory spending increases be offset by the same amount of tax increases or spending cuts to keep the federal deficit from rising.

The overwhelming majority of the 47-member Blue Dogs would vote against any bill that is not paid for, said Rep. Mike Ross, D-Ark., a leader of the group. ``For the life of me, I don't understand why the Republicans in the Senate continue to choose tax cheats,'' those avoiding taxes through offshore tax havens, ``when they ought to be standing with 21 million families.''