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Bush Threatens To Veto House Tax Legislation

by Mike Godfrey,, Washington

12 November 2007

The White House has warned Congress that President Bush may veto alternative minimum tax relief legislation if it lands on his desk with the current offset measures, including the proposed hike on carried interest.

The warning came as the House of Representatives prepared to consider Ways and Means Chairman Charles Rangel's Tax Reduction and Reform Act of 2007, the centrepiece of which is a proposal to eliminate the AMT for most individual taxpayers and a 4.5% cut in the corporate tax rate, but which also raises a number of other taxes to offset these tax cuts.

Rangel has touted his bill as the most comprehensive overhaul to the US tax code since the 1986 reforms, but his proposals have been derided by Republicans and senior administration officials. The White House Office of Management and Budget has now confirmed suspicions that Bush would refuse to sign the legislation, warning that "the president's senior advisers would recommend he veto the bill" if it reaches his desk in its current form.

Some of the bill's offset measures include the repeal of the domestic production activities deduction, the repeal of the worldwide allocation of interest, the limitation of treaty benefits for certain deductible payments, and the requirement that US corporations which defer income through controlled foreign corporations also defer the deductions that are associated with this income. Rangel is also proposing a change in the tax treatment of "carried interest" for fund managers, so that they will no longer receive the lower 15% capital gains tax rate, and a new 'surtax' on wealthy families to help pay for AMT repeal.

"The President called for a one-year AMT patch in February, but instead of acting promptly to send the President a bill he can sign, the House is just now considering a bill that would raise taxes on individuals and businesses by nearly $80 billion," White House Deputy Press Secretary Tony Fratto announced in a statement on Thursday.

"If Congress continues in its failure to send the President an AMT patch he can sign into law, as many as 50 million taxpayers could face delays in the processing of their returns and $75 billion in refund checks could be delayed – essentially forcing American taxpayers to extend a $75 billion no-interest loan to the IRS. Congress should not be playing politics with money American families are counting on to pay off credit card debt or get current on their mortgage," Fratto concluded.

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