The House today passed H.R. 7005 393-30, providing a higher exemption level for the AMT (increasing the exemption levels to $46,200 for individuals and $69,950 for married couples filing jointly), as well as extending the AMT stock option relief. The cost of the tax cut--around $70 billion for one year. The legislation goes back to the Senate, which has already passed an AMT patch without a revenue-raiser to offset the revenue reductions.
This is perhaps to be expected in an election year, but it is nonetheless disappointing. We are facing huge potential long-term costs from the financial bailouts that are continuing, and yet Congress continues to enact AMT patches without paying for them, even though there are reasonable and policy-sensible options for offsetting the revenue reduction represented by reasonable AMT relief for taxpayers in the lower brackets subject to the downward bracket creep of the AMT. Those options include (i) raising the rates on the top brackets, so that taxpayers with multimillionaire incomes pay at higher rates than those with incomes in the six figures, and/or (ii) eliminating the preferential rate for capital gains and dividends that accrue primarily to the wealthiest Americans, and/or (iii) repealing the deduction for state and local taxes, at least for those in the higher income brackets. See, e.g., Alternative Minimum Tax: 11 Key Facts and Projections, Tax Policy Center, Dec. 2006.
The Tax Policy Center also has some interesting tables showing the projected distribution of incomes and tax cuts in 2012 if the 2001-2006 revenue reduction provisions are made permanent and the AMT patch is extended, at this link.
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