Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee, has introduced a bill aimed at repealing the alternative minimum tax and cutting the top corporate tax rate while raising taxes in other areas, including on the salaries of hedge fund and private equity fund managers.

The $1 trillion plan would reduce the top corporate tax rate from 35 percent to 30.5 percent. Rangel does not expect the legislation, known as the Tax Reduction and Reform Act of 2007, to be voted on until next year, but he hopes to soon pass a stopgap measure to keep the AMT from spreading to 21 million more American taxpayers this year.

Rangel anticipates the legislation would bring a net tax reduction to nearly all families with less than $500,000 in income. Married couples filing jointly would be able to claim another $850 on their standard deduction under the plan, and individual taxpayers would be able to claim another $425. More lower-income taxpayers would qualify for the Earned Income Tax Credit, and the refundable child credit would increase. "We have attempted to restore equity and fairness to the system," he said.

Permanently repealing the AMT would cost an estimated $800 billion over 10 years. To help offset that, Rangel has proposed a $48 billion tax increase on executives of hedge funds and private equity firms. Private equity firm managers would no longer have their incomes taxed at lower capital gains rates as carried interest, nor could hedge fund managers use offshore tax havens to defer taxes paid for investment services.

Rangel also wants to apply a "replacement tax" of 4.6 percent on income over $500,000 for couples, or $250,000 for single taxpayers. The bill would limit itemized deductions for wealthy individuals and phase out deductions for personal exemptions.

Last-in-first-out methods of counting inventory would be repealed under Rangel's bill. The bill would also impose mandatory cost basis reporting on brokers trading stocks, bonds, commodities and other securities.

Jim McCrery, R-La., ranking Republican on the House Ways and Means Committee, said he was opposed to the proposals. While the cut in the maximum corporate tax rate may help sway some votes in Congress, Chris Edwards, director of tax policy studies at the Cato Institute, doesn't think it goes far enough. He pointed out that the average corporate tax rate in Europe is 24 percent.

"I'm increasingly of the view that the federal corporate rate should be cut substantially and the federal government wouldn't lose any money from that," he said. He believes the rate should be cut to 20 percent, not 30.5 percent, and that would encourage more companies to stop resorting to tax avoidance schemes.