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Grassley Bemoans Lack Of AMT Patch In House Stimulus Bill

by Mike Godfrey, Tax-News.com, Washington

22 January 2009


Senator Chuck Grassley, ranking Republican on the Senate Finance Committee, has criticized the version of the economic recovery legislation released by the House Ways and Means Committee last week for leaving out provisions that would curtail the reach of the alternative minimum tax for another year.

“The tax bill released by the House does not contain an alternative minimum tax patch for this year. If the alternative minimum tax patch is not enacted into law, millions of middle-class Americans won’t get much of the tax benefits that they appear to be getting under the House bill, because the alternative minimum tax will take these benefits away," Grassley commented in a statement.

"It makes no sense to give tax cuts with one hand and take them away with another. I’ll fight to have the alternative minimum tax patch for 2009 included in the Senate version of the stimulus bill, so that millions of middle-class Americans won’t have their tax cuts taken away before they ever receive them," he added.

When it was initially introduced, nearly 40 years ago, the levy was aimed at preventing just 155 of the country’s wealthiest households from employing tax breaks and sheltering income to such an extent that their tax liability became negligible.

However, due to a failure to index the levy to inflation, a phenomenon known as “bracket creep” has set in over the years, meaning that people who were never originally intended to be touched by the AMT -- such as middle income earners and families -- are falling into its clutches. As a consequence, Congress is forced into the annual ritual of applying a 'patch' to the legislation to prevent the tax system ensnaring ever more taxpayers lower down the income scales.

Grassley has been a long-time advocate of repealing the tax altogether, and this is an idea that has widespread support on both sides of the Congressional aisle. However, with the government facing a deficit of more than USD1tn, and with an expensive stimulus bill to pay for, the political will to eliminate a tax that it is estimated will pull in USD60bn in revenues over the next ten years is unsurprisingly, quite weak.


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