Patrick Joseph Murphy on Tax Reform
The AMT sets a minimum tax rate of 26% or 28% on some taxpayers so that they cannot use certain types of deductions to lower their tax. By contrast, the rate for a corporation is 20%. Affected taxpayers are those who have what are known as "tax preference items". These include long-term capital gains, accelerated depreciation, & percentage depletion.
Because the AMT is not indexed to inflation, an increasing number of upper-middle-income taxpayers have been finding themselves subject to this tax. In 2006, an IRS report highlighted the AMT as the single most serious problem with the tax code.
For 2007, the AMT Exemption was not fully phased until [income reaches] $415,000 for joint returns. Within the $150,000 to $415,000 range, AMT liability typically increases as income increases above $150,000.
OnTheIssues.org Explanation: This vote extends the AMT exemption, and hence avoids the AMT affecting more upper-middle-income people. This vote has no permanent effect on the AMT, although voting YES implies that one would support the same permanent AMT change.
Proponents support voting YES because:
Rep. RANGEL: We have the opportunity to provide relief to upward of some 25 million people from being hit by a $50 billion tax increase, which it was never thought could happen to these people. Almost apart from this, we have an opportunity to close a very unfair tax provision, that certainly no one has come to me to defend, which prevents a handful of people from having unlimited funds being shipped overseas under deferred compensation and escaping liability. Nobody, liberal or conservative, believes that these AMT taxpayers should be hit by a tax that we didn't intend. But also, no one has the guts to defend the offshore deferred compensation. So what is the problem?
Opponents recommend voting NO because:
Rep. McCRERY: This is a bill that would patch the AMT, and then increase other taxes for the patch costs. Republicans are for patching the AMT. Where we differ is over the question of whether we need to pay for the patch by raising other taxes. The President's budget includes a 1-year patch on the AMT without a pay-for. That is what the Senate passed by a rather large vote very recently, 88-5. The President has said he won't sign the bill that is before us today. Republicans have argued against applying PAYGO to the AMT patch. In many ways PAYGO has shown itself to be a farce.
The 33 member Blue Dog Coalition applauds Senator Joe Lieberman (D-CT) for his commitment to fiscal responsibility. In a floor speech today, Senator Lieberman called for a budget framework that would devote half of the budget surplus to debt reduction, a quarter of the remaining funds to tax cuts, the final quarter to targeted spending increases in America’s priority programs. Senator Lieberman touted a mantra long held by the Blue Dogs that “our top priority must remain debt reduction.”
Senator Lieberman’s position closely reflects the “50-25-25” equation for responsible budgeting long advocated by the Blue Dog Coalition. The Blue Dogs’ formula would extract the Social Security and Medicare Trust Funds from the projected budget surplus and use half of the remaining funds to pay down the national debt. After committing 50 percent to debt reduction, 25 percent would be allocated to tax cuts and the remaining 25 percent would fund increases in priority programs, such as education, agriculture, defense, and health care. “The 50-25-25 budget framework is a common sense, fiscally conservative approach that will provide for a healthy economy, lower taxes, and reduction of our national debt. I am pleased that Senator Lieberman stressed the need for fiscal discipline,” said Blue Dog Budget Task Force Co-Chairman, Rep. Dennis Moore (D-KS).
“Senator Lieberman got it exactly right,” said Blue Dog Co-Chairman Rep. Jim Turner (D-TX). “We need a budget that meets our commitments and lives up to our responsibilities. Most importantly, we need a budget that adds up. The 50-25-25 framework is a smart, conservative, approach that prioritizes paying down the debt and still leaves room for real tax relief.”
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