- The Washington Times - Monday, November 5, 2007

House Democratic leaders say they have cornered Republicans by tying relief from the alternative minimum tax to new taxes on business executives, forcing lawmakers to choose between saving middle-class families or Wall Street tycoons from higher taxes this year.

“It is a difficult position for [Republicans] to be in,” a top Democratic aide said. “If they want to be seen caring for the needs of the few at the expense of the middle class, they will have a hard time explaining that vote to taxpayers.”

However, Republicans say the Democrat-led Congress will not score political points playing chicken with tax increases.

At stake are 23 million middle-class families — some earning $50,000 annually — who will be walloped by the AMT if Congress does not intervene by year’s end.

House Minority Whip Roy Blunt said a tax cut for some Americans shouldn’t be paid for by raising taxes on everybody else.

“That’s exactly what the Democrats are trying to do with their so-called ‘AMT patch,’ using a temporary measure of relief as a justification to expand the reach of government deeper into taxpayers’ wallets,” the Missouri Republican said.

The AMT is a measure adopted in 1969 to make tax-sheltered wealthy Americans pay at least some income taxes. It was not indexed for inflation, and now it hits middle-income taxpayers if not forestalled by temporary “patches” passed by Congress.

House Speaker Nancy Pelosi, California Democrat, is expected to muster enough votes to pass the AMT patch and the accompanying $80 billion tax bill late this week.

The legislation faces formidable opposition from both parties in the Senate, which is scheduled to adjourn for the year on Nov. 16.

Senate Majority Leader Harry Reid has vowed to pass AMT relief that is “paid for.”

“I think it’s something we should be very proud of,” the Nevada Democrat said. “We’re not going to continue with the Republican process … where they did not pay for anything. I think we should pay for it.”

Ryan Loskarn, spokesman for the Senate Republican Conference, said the AMT was not intended to tax middle-class families, and therefore shouldn’t be viewed as lost tax revenue.

He said the onus is on the Democrats to write an AMT bill that can pass into law before tax season.

“At the end of the day, when people go to the ballot box, they know who is in charge of Congress when their taxes go up,” Mr. Loskarn said, noting that the Republican-led Congress kept the AMT at bay for a decade and passed a repeal of the tax in 1999 that then-President Clinton vetoed.

Democrats lumped a one-year AMT patch with other tax relief for the middle class — an expanded child tax credit and new deductions for college tuition, property taxes, and state and local taxes. It pays for the tax breaks by increasing taxes on carried interest that fund managers earn from investments and on deferred compensation that executives sometimes move to offshore tax shelters.

The bill provides the ante for a massive tax-code rewrite proposed last month by Rep. Charles B. Rangel, New York Democrat and chairman of the Ways and Means Committee, that reshuffles about $1 trillion in taxes by dealing tax relief to the middle class and more taxes to the rich.

Critics say the changes proposed by Mr. Rangel, most of which will not be debated until next year, combined with Democrats’ plan to let President Bush’s tax cuts expire, would raise taxes by $3.5 trillion over 10 years and boost the top marginal income-tax rate to 44 percent.

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