Ever since the Alternative Minimum Tax (AMT) was introduced as part of the 1986 tax reforms, corporate America has been lobbying for its removal. It looks like this dream may finally become a reality for the American business sector as President Bush announced recently that repealing the AMT is one of the cornerstones of his plan to boost the US economy.
Speaking to the National Association of Manufacturers, one of the AMT's fiercest opponents, the President explained: 'We've got to make sure our tax relief encourages investment, encourages the flow of capital. Corporate America doesn't have to get penalized during times of declining earnings.'
The Alternative Minimum Tax was the brainchild of Former Senate Finance Committee Chairman Bob Packwood, who insisted that the Reagan-era tax reform bill should include a minimum tax on corporations, after it was discovered that due to the large number of corporate tax breaks available, some US giants were paying next to nothing in US taxes.
The economic stimulus bill as passed by the House last month would not only repeal the tax, but would also refund AMT payments made by corporations over the years. President Bush differs here with the House of Representatives only in the detail - the House bill would authorise immediate refunds, whereas Bush would prefer them spaced out over a number of years.
The plan to repeal the AMT has come under fire from various taxpayer groups, and was not included in the economic stimulus proposal put forward by Senate Democrats, who believe that it is lack of demand for their products which is dogging the corporate sector, as opposed to lack of cash.
However Bob Packwood, who has seen his original bill nibbled away at by industry pressure groups, is philosophical about the proposed dismantling of the Alternative Minimum Tax. 'Maybe if you make it bad enough the peasants will finally revolt again,' he observed wryly in a Washington Post interview.
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