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Tuesday, April 03, 2007
Recess Round-Up II: The Status of AMT Reform
Work continues behind the scenes in the House on AMT legislation as Rep. Richard Neal (D-MA) chair of the House Ways and Means Suncommittee on Select Revenue Measures consults with Ways and Means and Budget Committee chairs Charles Rangel (D-NY) and John Spratt (D-SC). Reportedly under consideration: permanent, deficit-neutral AMT reform built around an exclusion for households below a given level, with increased rates making up the lost revenue -- less drastic than full repeal, previously advocated by Neal.
Senate Finance Committee chair Max Baucus (D-MT), who has favored full repeal, is meanwhile backing a two-year AMT "patch." Rangel, seeking to keep the flame up on reform, seeks a one-year patch. The Senate and House budget resolution ATM provisions reflect the Baucus and Rangel positions respectively.
The urgency facing policymakers is conveyed in this chart, showing an imminent and sharp increase in the number of taxpayers liable to the AMT:
A Center on Budget report out this week supports the idea of a permanent solution, speaking to the inefficency of contintuous patches, in terms of taxpayer-targeting:
[AMT patches] deliver a significant share of their benefits to households with very substantial incomes... Whether a given household is removed from the AMT by an increase in the AMT exemption depends on... how many of the deductions and exemptions that the household claims under the regular income tax are disallowed under the AMT.
and in terms of cost to the system:
The AMT relief provided in 2001-2006 was not paid for and, as a result, has already added more than $100 billion to deficits. Moreover, the costs of AMT relief rise sharply each year... Extending the patch just through 2007 would cost about $45 billion; continuing the patch for two years, through 2008, would cost about $100 billion.
Posted by Dana Chasin
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