The Senate passed a bill that would keep the alternative minimum tax from spreading to 23 million taxpayers, but without including any of the offsetting revenue-generating provisions included in a version of the bill passed last month by the House.
Despite pledges to adhere to "pay-as-you-go" rules to offset any tax cuts with corresponding increases in revenue, Senate Democrats bowed to pressure from the White House and Senate Republicans, who succeeded in blocking a version of the bill that included controversial provisions such as a tax increase on the salaries of managers of hedge funds and private equity firms. The bill passed on an 88-5 vote.
The AMT was created in 1969 as a way to prevent wealthy Americans from avoiding paying income taxes, but since it was never indexed to inflation it has ensnared an increasing number of citizens, including some who earn $50,000 or less. There are currently about 3.8 million taxpayers subject to the AMT.
"I am relieved that the Senate has acted this evening to extend AMT relief for 19 million taxpayers - including nearly 100,000 Nevadans," said Senate Majority Leader Harry Reid in a statement. "But I want to make it perfectly clear that I am very disappointed Republicans prevented the Senate from passing AMT relief in a fiscally responsible manner. Instead, Republicans insisted that the $50 billion cost of this proposal be added to the national debt - a debt that is already growing at a rate of $1 million a minute."
The move by the Senate will put pressure on House leaders to pass a version of the bill without the offsets. It is expected to do so as the Internal Revenue Service has already warned that the delays in patching the AMT already threaten to hold up tax refunds for millions of taxpayers. Twelve different forms need to be revised to reflect the changes.
Treasury Secretary Henry Paulson urged the House to quickly enact the Senate-passed AMT patch. "It is imperative that the House approve this and send it to the president without delay," he said in a statement. "We are only weeks away from the time when taxpayers can typically file their returns and will expect millions of dollars in refund checks quickly. The longer it takes to put this AMT patch into the law, the greater the delay in the filing season and those refunds."
