May 31, 2007
AMT Overhaul Schedule Slips
House Democratic plans to move legislation to scale back the alternative minimum tax have slipped to July at the earliest, as Democratic sources said tax writers need more time to agree on the details and Democratic leaders need time to bring the Caucus up to speed on the effort.
Ways and Means Committee Democrats have decided on a partial repeal that leaves the AMT in place for only the wealthiest taxpayers, and one key issue that has yet to be nailed down is where to set the income threshold.
"The piece I've been particularly interested in is making sure we get that cut-off right," Rep. Allyson Schwartz, D-Pa., said in an interview.
Ways and Means Select Revenue Measures Subcommittee Chairman Richard Neal, D-Mass., has mentioned a threshold of $250,000 for couples and $125,000 for individuals, but Democratic aides and lawmakers said that figure could adjust up or down before legislation is unveiled. A spokeswoman for House Majority Leader Steny Hoyer, D-Md., said leaders plan to address the issue on the floor in July.
Although Neal had aimed to introduce legislation early in June, Ways and Means members have been consumed with discussions on trade and energy taxes that are expected to move through committee next month.
Schwartz has a keen interest in the AMT discussion because the constituents in her suburban Philadelphia district are more susceptible to having to pay the AMT because of high state and local taxes. About 80,000 of her constituents would be hit by the AMT if Congress did not renew the temporary "patch" it has passed in recent years, she said. Discussions continue on how to offset the cost of AMT overhaul, which could reach as high as $800 billion.
Sources familiar with committee discussions said the most likely approach is a surtax on adjusted gross income of upper-income taxpayers. The nonpartisan Tax Policy Center last week released a proposal for a 4 percent surcharge on all income above $100,000 for singles and $200,000 for couples, which it estimated would fully offset the cost of AMT repeal over 10 years. Such a surtax would apply to income before most deductions, including the mortgage interest deduction, and could be structured to apply to other types of income including capital gains and dividend income.
Aside from the policy issues, one House Democratic aide said leaders want more time to lay the groundwork and outline the implications for the Caucus, including concerns about who will lose as a result of tax increases needed to fund the AMT.
"Frankly, the AMT is an urban problem, not a rural problem," House Agriculture Chairman Collin Peterson, D-Minn., told CongressDaily.
Democratic Rep. Lincoln Davis of Tennessee, a member of the Blue Dog Coalition, said he is encouraged that tax writers are taking a revenue-neutral approach.
House Democratic Caucus Chairman Rahm Emanuel of Illinois acknowledged that there needs to be a discussion within the Caucus about AMT efforts. But he said Ways and Means members serve as proxies for the diverse Caucus interests.
"The Ways and Means Committee represents the breadth, depth and range of the Caucus. And we are comfortable with the fact that this will bring a significant tax cut to middle-class families," Emanuel said.
-Martin Vaughan, CongressDaily
