Finance Committee Senators Seek to Repeal Alternative Minimum Tax
Grassley, Baucus, Wyden, Kyl will introduce bipartisan legislation to end “number one problem” for millions of middle-class American taxpayers
Washington, DC – A bipartisan coalition of U.S. Senate Finance Committee members,including Chairman Charles Grassley (R-Iowa), Ranking Member Max Baucus (DMont.),Ron Wyden (D-Ore.) and Jon Kyl (R-Ariz), today introduced legislation to repealthe Federal individual alternative minimum tax (AMT). The AMT requires taxpayers tofigure their tax bills both with and without certain deductions, then to pay the higheramount. It was originally enacted in 1969 to ensure that America’s wealthiest taxpayerscould not use deductions and loopholes to avoid paying taxes they owed. However, theAMT has not been indexed for inflation and now saddles millions of middle-class, middleincomeAmericans with higher tax bills. The Internal Revenue Service’s own NationalTaxpayer Advocate has called it the most serious problem facing individual taxpayerstoday.
“The Alternative Minimum Tax isn’t so alternative anymore. It’s become prettycommon,” said Grassley. “We have two parallel tax systems that make taxpayers dotwo sets of calculations and if they get an AMT hit, pay more. If we do nothing, thesituation will get worse. It’s a mess, and we need to clean it up for good.”
“This weekend, millions of Americans watched in suspense as Anakin Skywalkerwas lured to the Dark side and became Darth Vader,” said Baucus. “What millionsof those same Americans may not be aware of is another Darth Vader lurking inour tax code; that is the AMT. Both Skywalker and the AMT started off with goodintentions, but eventually they went astray. Now, the Darth Vader of the Tax Codeis bearing down on millions of unsuspecting families. Repealing the AMT willprotect millions of American families from this unfair and unexpected tax. It’stime to put the AMT in a galaxy far, far away and erase it from the tax code.”
“If the IRS calls the alternative minimum tax the number-one problem forindividual American taxpayers, then the AMT should be Congress’ number-onepriority for tax reform,” said Wyden. “Middle-class Americans who are paying theirfair share of taxes shouldn’t be subject to higher burdens because the Federalgovernment has failed to update the law.”
“Our goal for tax reform and simplification must be to create a tax system thatsupports continued economic growth and prosperity by encouraging work, savingsand investment, and that does not waste taxpayers’ time and effort with needlesscomplexity. To achieve these goals, Congress must repeal the AMT,” said Kyl.
The Finance Subcommittee on Taxation and IRS Oversight, chaired by Senator Kyl,today held a hearing entitled “Blowing the Cover on the Stealth Tax: Exposing theIndividual AMT.” For Americans over a certain income range, the AMT eliminatescertain tax benefits such as personal exemptions, itemized deductions for state and localtaxes, and deductions for children; those normally deducted amounts are counted asincome and subject to Federal tax. The current temporary “patch” or increase in AMTexemptions, a mechanism often used to keep the tax from affecting even moreAmericans, is set to expire at the end of 2005. According to the Congressional ResearchService, the end of those exemptions would increase the number of taxpayers paying theAMT to more than 19 million next year – up from 2.3 million in 2003.
The AMT was never intended to tax such a broad segment of the population or to be reliedupon as a revenue base. The bipartisan “Individual Alternative Minimum Tax Repeal Actof 2005” would amend the Internal Revenue Code of 1986 to end the AMT beginning inthe 2006 tax year. The Senators have indicated that they intend to work together toconsider all possible meaningful solutions to the problems posed for middle-class taxpayersby the AMT.
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