President Bush demanded Saturday that Congress send him legislation that keeps middle-class Americans from being hit at tax time next year by the dreaded alternative minimum tax.
That's not likely to happen anytime soon. Congress has adjourned for the Thanksgiving holiday. The legislation is muddled in the House and Senate. And Bush has threatened to veto any bill that raises taxes as a way of fixing the tax, known in shorthand as AMT.
"I will veto any bill that raises taxes as a condition of fixing the AMT," Bush said in his weekly radio address. "Members of Congress must put political theater behind them, fix the AMT and protect America's middle class from an unfair tax hike."
The AMT was created in 1969 to ensure that a small number of wealthy people could not use tax breaks or deductions to avoid paying any taxes. It was never indexed for inflation, and every year the AMT net falls on more middle-income taxpayers. This year some 4 million people were subject to the tax.
If Congress and the White House do not reach a compromise by the end of the year, anywhere from 21 million to 25 million middle-income taxpayers will be subject to it, costing them as much as $2,000 in extra taxes.
Earlier this month, House Democrats pushed through an $80 billion bill that would extend AMT relief for one year, at a cost of about $50 billion. It also includes another $30 billion in popular tax relief measures. To cover the $80 billion price tag, the bill would bring in revenue by changing tax rules affecting corporate transactions.
The White House said this amounts to a tax increase that would undermine the competitiveness of U.S. businesses in the global economy and could have adverse effects on the U.S. economy. Some pro-business Democrats joined Republicans in expressing concern that the carried interest provision could hurt venture capital and real estate investors as well as hedge fund managers making hundreds of millions of dollars.
"Congress should not use legislation that millions of Americans are counting on to protect them from higher taxes in one area as an excuse to raise taxes in other areas," Bush said.
Hoyer: Dems trying to close tax loopholes
During the House debate on the bill, House Majority Leader Steny Hoyer, D-Md., said that "while virtually all of us want to mitigate the reach of the AMT, Republicans are complaining that Democrats have the audacity to close tax loopholes and to insist on fiscal responsibility."
Republicans claim that closing loopholes constitutes a tax increase, he said. "I reject their premise. All we are doing is insisting that people pay their fair share."
The Senate, meanwhile, is working on separate legislation.
Bush said Congress' inaction is actually costing taxpayers in other ways.
Because tax forms for 2007 had to be sent to the government printer, the Internal Revenue Service is being forced to send out tens of millions of tax forms that Bush said will almost certainly end up being wrong — "wasting your money, delaying refunds and making it even more complicated to figure out your taxes."
