Eric Satterley writes:
An immediate need is to change the alternative minimum tax recapture law. On stock options you were forced to pay the alternative minimum tax even if you exercised any options (even if you did not sell the stocks). The law was that you could recapture/apply the tax paid toward the capital gains when you sold the tax. A couple of years ago that changed and you can nolonger recapure/apply the tax paid toward capital gains if you are subject to alternative minimum tax. Net effect is that you are now double taxed on the same shares of stock and it is doubtful that a person will ever be able to recapture any of the taxes since most tax payers are now subject to alternative minimum taxes.
This is not fair and needs to be addressed immediately.
As blogged previously, Obama’s proposed stimulus package is meeting resistance – on both sides of the aisle.
Key members of the Senate Finance Committee have criticized plans for a $3,000 tax credit for new hires, citing that it wasn’t the most effective means of promoting employment. Sen. John Kerry (D-MA) said, “I’d rather spend the money on the infrastructure, on direct investment, on energy conversion and other kinds of things much more directly and much more rapidly and much more certainly create a real job.”
Also on the hit list? Proposed tax credits for working Americans, which had been pitched as a reduction in federal withholding. The credit would work out to $19.23 per week for married couples and a mere $9.62 per week for individuals. Some Senators (and readers on my blog) have suggested that would not do much for the economy, considering the cost.
Some members of the House are also calling for changes to the much dreaded AMT (alternative minimum tax), a continual thorn in Congress’ side. Of course, if history is any indication, if they start whining about the AMT now, they might – might – reach an accord by December…
Surprisingly, there has been little reaction to Obama’s plan (or lack of a plan) to not touch the federal estate tax. I’m guessing that proponents of eliminating the tax realize that it might not be politically advantageous to raise the idea of cutting the federal estate tax (with exemptions sitting at $7 million per family in 2009) during the current economic climate. But I’d expect to see the idea raised sometime during the year – the flukey one year “repeal” of the federal estate tax is set for 2010, with sunset provisions ready to drop the exemption to $2 million per family in 2011 with no action from Congress.
Of course, all of this is still just conversation until the ink is dry. What are your thoughts on what will stay and what will go? Got any better ideas?
While the nation’s attention was turned to the financial bank crisis, the House passed a bill increasing the exemption level for the alternative minimum tax (AMT) to $46,200 for individuals and $69,950 for married couples filing jointly. The motion passed by a margin of 393-30. The bill provides about $2,000 of relief each to affected taxpayers.
What does it mean? Perhaps nothing. Earlier this year, the House tried to pass AMT relief but the White House threatened to veto the bill. The threat was meaningless since the bill didn’t pass the Senate. One reason it didn’t pass? The $61 billion price tag which somehow seemed important earlier this year.
Interestingly, the cost of the most recent bill for one year is estimated to be $70 billion. There is no revenue raising component to the bill. And yet, Congress doesn’t seem bothered. After all, it’s just money, right? I guess $70 billion pales in comparison to the $1.3 trillion bailout.
This legislation goes back to the Senate, which has already passed its own version. The Senate version of the bill includes disaster relief, extension of business and individual tax breaks and offering tax incentives for renewable energy investment (more on that in a future post).
Practically no one disagrees that AMT relief is needed on some level. But really, this is a mess. It’s another patch, folks. Congress just loves these AMT patches. God forbid that they pass anything that offers a real solution.
Defying the White House, Representatives in the US House voted to prevent about 22 million taxpayers from being hit by the alternative minimum tax (AMT).
What?
Oh yeah, just like with any headline, there’s more.
The idea of AMT relief was originally endorsed by the GOP (such as Senator McCain). The problem with AMT relief? The $61 billion hole in the budget left behind.
To offset the hole, Deomocrats propose to raise revenue in three key areas:
1, The bill would tax the “carried interest” of private equity and hedge fund managers at ordinary income tax rates instead of the 15% capital gains rate;
2, The bill would close a loophole that Democrats say has allowed foreign-owned US firms to avoid taxes on payments to foreign parent companies as a result of tax treaty provisions; and
3, The bill would bar integrated oil companies from claiming a domestic manufacturing tax deduction and would freeze the benefit for smaller oil and gas companies. Integrated oil companies are those involved in the upstream (i.e., exploration and production) and downstream (i.e., refining, marketing, distribution and retailing) segments of the industry. Prior to 2004, oil companies were not entitled to this deduction which was estimated to cost $3.5 billion over 5 years.
House Ways and Means Committee Chair Charles Rangel (D-NY) claims that the offsets are necessary in order to prevent the deficit from getting bigger: “We’ll be able to say we didn’t borrow the money and we didn’t put this burden on our children and grandchildren.”
But the GOP and the White House see it differently, calling the offsets a “permanent tax increase.”
With the offsets in place, the bill likely won’t pass the Senate. If it does, the White House has threatened a veto.
I think we all agree that AMT relief needs to happen in some form – and not as a series of last minute patches. The question is whether there should be an accompanying revenue offset: what do you think?
