The Alternative Minimum Tax Fix Proves To Be Pricey
Friday, December 07, 2007SUSIE GHARIB: After months of political posturing, it looks like Democrats and Republicans on Capitol Hill are ready to cut deals in time to get home for the holidays. The first signal was an overwhelming vote in the Senate last night in favor of a fix for the alternative minimum tax. But as Darren Gersh reports, it came at a high cost for Democrats.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: The temporary fix on the alternative minimum tax will cost $50 billion. Now that Democrats in the Senate have dropped plans to pay for that tax cut by raising other taxes or cutting spending, House Majority Leader Steny Hoyer signaled his members may have no choice but to go along with the Senate.
REP. STENY HOYER, MAJORITY LEADER: So we'll have to see how we can resolve that and make sure something passes that can pass the Senate.
GERSH: Executives of private equity firms are a big winner here, avoiding a large tax increase. Tax expert Leonard Berman says Democrats are sending a bad signal on the budget by abandoning their core principle of fiscal discipline.
LEONARD BURMAN, CO-DIRECTOR, TAX POLICY CENTER: I'm reminded of what Will Rogers said, that when you find yourself in a hole, the first thing to do was to stop digging. And every time we enact another tax cut or enact more spending programs, we have to figure out how to pay for it, we are digging the hole deeper.
GERSH: The next big deal could be cut next week on energy. There the question is whether Democrats will scrap a provision requiring power companies to use more renewable fuels. That would be a big win for coal companies. The other issue, says Lehman Brothers political analyst Chuck Marr, is whether to scale back tax hikes for oil companies, a sensitive topic for oil state Republicans.
CHUCK MARR, POLITICAL STRATEGIST, LEHMAN BROTHERS: And the question is, can they modify that tax package enough and still pay for it, but maybe not go after the oil companies as much to get enough Republican support to pass it?
GERSH: Congress has waited so long to finish its work that next year's agenda is already on the table. Today, top Democrats like Barney Frank of Massachusetts suggested they'll be looking for ways to inject new spending into the economy.
REP. BARNEY FRANK, (D) MASSACHUSETTS: The time has come to think about stimulating this economy, to prevent either a recession or a slowdown in economic growth that will certainly feel like a recession to a lot of people.
GERSH: Next year's agenda is likely to be shaped by forces outside the beltway. At the top of that list, the economy and the presidential election. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
