Grassley Behind Democrat Desire To Axe AMT

by Mike Godfrey, Tax-News.com, Washington

01 December 2006

Chuck Grassley, Chairman of the Sentate Finance Committee, has thrown his weight behind a renewed efforts by the Democratic leadership to repeal the Alternative Minimum Tax (AMT).

As Chairman of the Committee, Grassley has led efforts to enact an annual "patch" to make sure that no more middle income taxpayers fall into the AMT trap, but he argues that the system has "long outlived its usefulness" and must be dispensed with.

“We’ve kept more taxpayers out of the AMT every year for the last six years, and the AMT needs to be repealed for good," Grassley stated on Wednesday.

Enacted in the 1960s, AMT is a shadow tax system which was originally designed prevent wealthy individuals reducing their tax liabilities to little or nothing through various deductions. However, AMT was not indexed to inflation, and consequently the number of taxpayers liable to calculate their taxes under the AMT system has steadily increased.

Charles Rangel, the New York Democrat who is in line to take over the chairmanship of the House Ways and Means Committee, has made tackling AMT permanently a high priority for the next Congress.

It is estimated that full repeal of AMT will cost more than $1 trillion in revenues over ten years. However, Grassley has warned Democrats, who now control the House, not to be blinded by the amount of revenue the tax provides for government spending.

"It’s ridiculous to rely on revenue that was never supposed to be collected in the first place," he argued.

"Another trap is raising taxes to ‘pay’ for AMT repeal. It’s unfair to raise taxes to repeal something with serious unintended consequences like the AMT," he added.

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