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Paulson Unhappy With House AMT Proposals

by Mike Godfrey,, Washington

05 November 2007

Treasury Secretary Henry Paulson has called on House tax writers to reconsider proposals for a new one-year alternative minimum tax patch that is offset by eliminating tax breaks for company executives and fund managers.

"While I appreciate the Ways and Means Committee for taking up an AMT patch, the fact that this legislation raises taxes that would hurt our economy makes it very difficult for a patch to be passed quickly. Since February, we've asked for an AMT patch that does not raise other taxes. I still believe this is the right policy," Paulson argued in a statement released Thursday.

Paulson's remarks came in response to the House Ways and Means Committee's approval - by a vote of 22-13 - of the Temporary Tax Relief Act of 2007. According to Committee Chairman Charles Rangel (D -NY), the "fiscally responsible" legislation would prevent more than 23 million families from experiencing a tax increase under the alternative minimum tax (AMT) in 2007, and extend a number of popular tax breaks and credits for individuals and business that are due to expire.

The tax package also contains a number of revenue raising measures to offset the cost of the tax cuts, but Rangel has defended these by claiming that they close unfair loopholes and eliminate "narrowly targeted tax benefits enjoyed by a privileged few".

These offsets include: restricting executives' entitlement to deferred compensation; taxing investment funds' carried interest as ordinary income not investment income; modifying the unrelated business income tax (UBIT) rules to prevent tax-exempt entities investing in hedge funds through offshore 'blocker' corporations; changing the treatment of gains from sales between related parties; and imposing mandatory basis reporting by brokers for transactions involving publicly traded securities.

However, Rangel's arguments failed to convince Paulson.

"With only weeks to act to avoid the risk of 25 million taxpayers facing unintended tax increases, or millions more facing significant delays receiving refunds, Congress must quickly pass a patch that does not raise other taxes," he insisted.

"The legislation passed through the Ways and Means Committee today does not meet that criteria. I again call on the leaders of both the House and the Senate to act quickly on an AMT patch that the President can sign for this year," he concluded.

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