The Bush administration threatened to veto the Temporary Tax Relief Act of 2007 in its present form, putting the patch for the alternative minimum tax in jeopardy as the deadline nears for fixing the AMT before it spreads to millions more taxpayers.
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The House Ways and Means Committee approved the measure last week, which contains pay-go provisions to make up for the resulting loss in tax revenue by raising taxes in other areas, including taxing the carried interest earnings of financial management partners as regular income. The full House is scheduled to take up the bill this week.
"The administration does not believe the appropriate way to protect 21 million additional taxpayers from 2007 AMT liability is to impose a tax increase on other taxpayers," said a statement of administration policy. "Accordingly, if H.R. 3996 were presented to the president in its current form, the president's senior advisors would recommend he veto the bill."
The administration chided the House for waiting so long to patch the AMT, risking delays in the processing of returns and tax refunds. Among the administration's objections are hiking taxes on "partners in partnerships, increasing taxes on U.S.-based employees of corporations headquartered in countries with dissimilar corporate deduction rules, and subjecting U.S. companies to continued double taxation by delaying the effect of new rules for allocating worldwide interest for foreign tax credit purposes."
The administration also bemoaned the inclusion of a provision that would repeal the current statutory authorization for the IRS's private debt collection program and said termination of the program would result in a significant loss of revenue.