- The Washington Times - Monday, May 23, 2005

ASSOCIATED PRESS

The alternative minimum tax (AMT) — which one Democrat compared to the villain of “Star Wars” — should be repealed this year, the chairman of the Senate Finance Committee said yesterday.

Sen. Charles E. Grassley, Iowa Republican, said he would not wait for President Bush to propose reforms to try to do away with the tax, which was originally aimed at the very rich, but increasingly affects many middle-class families.

“From my standpoint, AMT can be resolved in tax reform, but tax reform should not be the only avenue for resolution. I’ll be looking for the earliest legislative opportunity to reform the AMT,” Mr. Grassley said.

Montana Sen. Max Baucus, the top Democrat on the Senate Finance Committee, compared the tax to a young Jedi knight lured to the dark side in “Star Wars.”

Both “started off with great intentions, but eventually they went astray,” Mr. Baucus said. “And now we have the Darth Vader of the tax code bearing down on millions of unsuspecting families.”

Mr. Grassley, Mr. Baucus and two other senators on the tax-writing committee introduced a bill this week to repeal the tax — a measure that is estimated would take $611 billion in revenue from the federal government over the next decade

“It’s not only a tax that’s going to ruin the middle class, that was never to be taxed in the first place, it was never supposed to bring one penny into the Treasury,” Mr. Grassley said. “So what’s the big deal about doing away with it?”

Mr. Grassley said he expected to get widespread support in the Senate. “This should get Democratic support right off the bat, because all these people that are being taxed are in their blue states,” he said.

Robert J. Carroll, deputy assistant Treasury secretary for tax analysis, told the Senate Finance subcommittee on taxation and IRS oversight that the alternative minimum tax is too costly to simply repeal.

“It is both inevitable and timely that the long-term solution to the AMT problem will be through broad reform of the income tax,” he said.

The federal government’s loss of revenue by repealing the alternative minimum tax would increase — to more than $800 billion — if lawmakers extend the tax cuts passed during the Bush administration past their expiration date at the end of the decade.

That cost estimate also reveals how swiftly the tax is expected to expand if not changed. The Treasury Department estimated that the alternative minimum tax will cover more than 50 million taxpayers in 2015. Next year, if a temporary solution lapses, more than 20 million taxpayers can expect to pay.

Mr. Carroll told lawmakers that the tax no longer fulfills its original mission to ensure that wealthy taxpayers pay some taxes. Despite the AMT, several thousand high-income taxpayers escape taxation every year, he said.

Congress implemented the alternative minimum tax in 1969 after discovering that 155 wealthy people paid not a penny in income taxes. Now, the AMT has begun affecting taxpayers with several children or taxpayers who live in states with high income and property taxes. Those families see their paperwork increase, their taxes go up and their tax breaks disappear.

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