House to vote today on limiting minimum tax

[Ron Burgundy]

AP - The House is to vote Wednesday on extending relief to more than 20 million taxpayers in danger of getting hit by the alternative minimum tax this year, setting up a war of wills with the Senate on how to deal with an unpopular levy that many believe must be stopped in its tracks.

The House, insisting that fixing the AMT must not add to the federal deficit, includes $61.5 billion in new revenues, mostly by increasing taxes coming from corporations. Senate Republicans, using their filibuster powers to block unwanted legislation, say it is wrong to increase taxes to extend current tax law.

Without congressional action, the number of taxpayers swept up by the AMT could balloon from around 4 million to between 25 million to 30 million. The Bush administration estimates that 22 million would be newly exposed to the tax without a legislative patch. Citizens for Tax Justice says the average tax relief would be about $2,300, with about two-thirds going to taxpayers with incomes of $127,000 or more.

The AMT was enacted in 1969 to catch a small number of very rich tax dodgers, but the tax now hits many more people because it was never adjusted for inflation. This has led to an annual scramble by Congress to provide one-year fixes.

Last year the battle over whether the AMT relief should be paid for with new revenue sources continued to the last day of the congressional session in December, when the House finally abandoned its position and passed an AMT without "offsets."

The offsets in the package before the House Wednesday include a measure that would raise $31 billion over 10 years by increasing the tax rate on the share of investment profits received by private equity and hedge fund managers, also known as carried interest. The bill would also disallow certain deductions oil and natural gas companies receive for domestic production, bringing in $13.6 billion.

A third provision requires credit card companies to inform the IRS of payments they make to merchants for credit and debit card transactions. This would allow the IRS to better track business income, raising some $9.8 billion. Finally,the bill closes a loophole used by foreign multinationals to avoid taxes on income earned in the United States, raising almost $7 billion.

The White House threatened a presidential veto of the AMT fix if it is accompanied by the new revenue provisions. "The administration urges Congress to reduce the risk of disruption to the 2009 tax filing season by eliminating tax increases from the bill," it said in a statement.

The fight over offsets last year forced the IRS to delay sending out refunds to millions of taxpayers because it had to adjust its computer programs to comply with the late changes in the AMT law.

___

The bill is H.R. 6275

On the Net:

Congress: http://thomas.loc.gov

source: http://news.yahoo.com/s/ap/20080625/ap_on_go_co/congress_taxes [link]