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US House Approves Rangel's AMT Fix

by Mike Godfrey,, New York

13 November 2007

The United States House of Representatives has approved legislation which would provide a temporary patch on the alternative minimum tax and extend a number of popular temporary deductions and tax credits, but its offset provisions continue to leave a sour taste in the mouth for Senate Republicans and the Bush administration.

The House passed the Temporary Tax Relief Act of 2007 on Friday by a vote of 216-193. The bill seeks to prevent an additional 23 million families being sucked into the AMT system for the the 2007 tax year, and extends tax credits and deductions such as the deduction for State and local sales tax, tuition, out-of-pocket expenses for teachers and research and development that would otherwise expire at the end of the year.

However, to pay for these popular and widely-called for measures, Ways and Means Chairman Charles Rangel has written in a number of controversial offsets that he says will close loopholes and narrowly-targeted tax provisions enjoyed by a 'privileged few', including changing the treatment of carried interest earned by venture capital and real estate partnerships so that it is treated as ordinary income rather than investment income. Hedge fund managers will also be prevented from deferring US taxes on their offshore income.

“This bill poses a simple question: whose side are you on?" Rangel asked in a statement issued following the House vote.

"The choices are clear," he added. "A vote in favor of this bill was a vote in favor of responsible tax relief for millions of hardworking, middle-class families. Those who voted against this bill chose to protect the special interests of a privileged few at the cost of tax relief for millions. The House of Representatives did the fair, responsible thing and the American people are now watching the US Senate to see whose side they are on."

Rangel also argues that it would be fiscally irresponsible of Congress to pass a tax bill that isn't fully offset, so as not to add to America's level of debt, and has challenged the administration, which called for a revenue neutral AMT fix that did not raise taxes, to come up with a better solution that wouldn't involve potentially deep cuts in spending. But unfortunately for Rangel, in its current form, the bill stands little chance of clearing the Senate, where Finance Committee Chairman Max Baucus is already considering changes to the bill in an attempt to appease Republicans opposed to its tax increases. Moreover, the White House last week gave its clearest indication yet that it would, in any case, veto an AMT fix offset with tax hikes.

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