For the past few months, we’ve been tracking the progress, or lack thereof, of legislation to protect taxpayers from the growth of the Alternative Minimum Tax. The two principle points of tension were:
- Conflicting approaches between the House and the Senate. The House, under the leadership of Chairman Charlie Rangel, was pressing to do something permanent. The Senate, on the other hand, made it clear that they were only interested in a one or two year “patch” to temporarily stem the growth of AMT taxpayers.
- Conflicting approaches on how to offset the revenue impact of addressing the AMT, or whether to offset the cost at all. Even a one-year AMT patch would reduce revenues by about $55 billion. Coming up with that level of corresponding, and politically salable, tax increases would be extremely difficult.
A couple of events occurred yesterday that brought these two tensions out into the open. First, Chairman Rangel, for the first time, acknowledged that a temporary AMT patch would be necessary this year. While he still intends to introduce a plan to permanently address the growth of the AMT, perhaps as early as next week, he is now suggesting that package may not be considered until next year. For most observers, the need to take up a one-year AMT patch was clear for some time, but this is the first time the House Ways and Means Chairman has confirmed it.
Second, CongressDaily reported this morning that Senator Conrad – Chairman of the Senate Budget Committee and senior member of the Finance Committee – walked out of a Finance members meeting yesterday when he learned that Chairman Baucus did not intend to offset the $55 billion cost of a one-year AMT patch. According to CongressDaily:
“Conrad stormed out of a bipartisan Finance Committee members meeting, telling reporters that the Baucus plan was “unbelievably irresponsible.” “The answer in that room is, ‘Borrow the money from China and Japan and stick the American people with debt as far as the eye can see,” said a visibly outraged Conrad. According to other sources in the meeting, Baucus proposed to waive pay/go for the one-year AMT patch, while providing offsets for $45 billion in expiring business tax provisions, which would be extended through the end of 2009.”
Exactly what this means for the expected AMT/Extender/Miscellaneous tax package that needs to move before the end of the year is unclear. Congress will have to address the short-term AMT challenge. Otherwise, about 20 million taxpayers, mostly families with children, will see their taxes increase when they file on April 15, 2008. Two possibilities are a compromise between Baucus and Conrad on the level of offsets in the package, or an effort by Baucus to find votes for his package from the Republican members of his Committee.