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?
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