Like their GOP predecessors, the Democrats in charge of Congressional tax committees continue to wring their hands over the fiscal train wreck looming due to the escalating alternative minimum tax.But agreement on a way to stop that runaway AMT locomotive - a step that many tax accountants say is needed to head off a tax revolt by millions of middle-income American families - seems just as elusive as ever.

The latest legislative foray into the AMT morass - a recent round of hearings by the House Ways and Means Subcommittee on Select Revenue Measures - did at least generate bipartisan concern over the problem.

"The AMT has become a stealth tax on far too many working families," subcommittee chairman Richard Neal, D-Mass., said at the start of the hearings.

Although it (AMT) was originally enacted to ensure that a small group of high-income individuals who managed to avoid paying any income tax would pay at least a minimum amount of tax, Neal said that this year taxpayers filing joint returns with no dependents could be subject to the AMT at income levels as low as $75,395.

Bush administration witnesses at the hearings echoed Neal's concerns, warning that while the AMT was originally adopted in 1969 to prevent multi-millionaires from escaping tax liabilities, has become a ticking financial time bomb for millions of American families.

During the 2006 tax year, four million Americans were impacted by the AMT, and the number affected could rise six-fold this year, assistant Treasury Secretary for tax policy, Eric Solomon, warned the subcommittee.

Without action by Congress to address the problem this year, the number of taxpayers projected to be affected by the AMT will rise sharply, from 4 million in 2006, to 25 million in 2007, Solomon said.

It only gets worse after that, Solomon added. He explained that if no further changes are made to the AMT, the number of taxpayers affected by the AMT is expected to grow to over 56 million by 2017 - almost half of all Americans subject to the federal income tax.

Over that time span, the cost of the AMT to U.S. taxpayers will balloon from $22 billion, to $250 billion. Solomon maintained that by then, solutions to the problem will have become too expensive.

Solomon told the House panel, that "AMT revenue will become so large that by 2013, the cost of repealing the AMT would exceed the cost of repealing the regular (income) tax."

For more than 20 years now, Congress and administration officials have addressed the AMT dilemma through a series of temporary legislative patches that have spared many middle-income taxpayers.

The Bush administration is seeking another of these temporary patches as part of its FY 2008 budget proposal, but Solomon told Congress that what's really needed is a permanent fix.

"A permanent solution is essential for the continued functioning of our individual income tax system and the White House is committed to working with Congress to develop such long-term relief," Solomon told the subcommittee.

At this point, Neal made it clear that his committee was focusing on gathering information, rather than on proposing specific remedies.

"We are committed to fully understanding the scope of this problem so that we can find a solution and prevent millions of working families from a massive and unexpected tax increase," he said.

But while Congress and the White House were unwilling to advance specific long-range solutions, advocates for taxpayers didn't hesitate to share their thoughts.

National Taxpayer Advocate Nina Olson, for one, bluntly called on lawmakers to rip the AMT out by its roots.

Calling the AMT the most serious problem facing taxpayers today, Olson that "if I were given the opportunity to make just one change to the Internal Revenue Code, I would use it to eliminate the individual AMT."

Although replacing the trillions of dollars in revenues lost as a result of AMT repeal has discouraged Congress and the administration from taking action, other witnesses at the House hearings were brimming with suggestions.

Leonard E. Burman, PhD, director of the Tax Policy Center a joint venture between the Urban Institute and Brookings Institution, argued that full repeal of the AMT could be financed in a variety of ways, such as "increasing regular income tax rates, repealing the state and local tax deduction and repealing the reduced tax rates for capital gains and dividends."

As an alternative, he told lawmakers that AMT reform could be financed by rolling back the 2003 reductions in the tax rates on capital gains and qualified dividends and combining that with an 8 percent increase in the top three income tax rates above their pre-2001 levels. That would result in a top rate of 42.8 percent.

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