House Passes Bill to Ease Middle-Class Tax Burden
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KWAME HOLMAN: House Democrats brought a measure to the floor today that would shield millions of middle-class households from the alternative minimum tax, or AMT.
REP. NANCY PELOSI (D-CA), Speaker of the House: This legislation is important because it provides long-overdue middle-class tax relief.
KWAME HOLMAN: Republicans said they were all for doing away with the tax, but rejected the way the Democrats proposed to do it.
REP. JEB HENSARLING (R), Texas: All they’re doing is re-arranging the deck chairs on the Titanic tax ship.
History of the tax
KWAME HOLMAN: The AMT was an element of the 1969 Tax Reform Act, intended to target multimillionaires who were eligible for so many tax breaks they paid little or no income tax. But the tax has not been indexed for inflation, so that now most taxpayers earning between $200,000 and $500,000 a year, even some making as little as $50,000, can be hit by the AMT.
REP. CHARLIE RANGEL (D), New York: Mr. Speaker and my colleagues, I hope that this could be considered the National Lobbyist Day for the Middle Class, because certainly this is what we're trying to do.
KWAME HOLMAN: The Democrats' temporary patch would exempt some 23 million taxpayers from paying the tax for 2007, but getting rid of the AMT would result in a revenue loss of more than $50 billion. House Democrats would offset that loss by increasing taxes on hedge fund and private equity firm managers. They argued those managers were being taxed at a lesser rate than most people.
Barney Frank of Massachusetts.
REP. BARNEY FRANK (D), Massachusetts: Now, I do not criticize these people. I think they perform a useful economic function. But they are the wealthiest people in the country and in the history of the world on the whole.
The notion that if they have to pay somewhat more tax up to the level that most of us pay on income, they will somehow go on an economic strike and stop doing these things is badly flawed.
They are not engaging in this activity as a favor to us so that they will quit if we offend them. They're doing it because it's a way for them to make money, as they have a right to do. They'll still be making enough money to keep doing it.
Republicans warn of business impact
KWAME HOLMAN: Republicans countered that the measure would impact businesses beyond those targeted by Democrats.
Eric Cantor of Virginia.
REP. ERIC CANTOR (R), Virginia: When you look at it, this provision, the provision of carried interest, impacts not just those famed partnerships in the money centers of this country, but it impacts the real estate partnerships, the mom-and-pop investment partnerships across this country that, frankly, fuel 7 out of 10 jobs across America. Where in the world do we think these small businesses are going to come up with the money to pay these taxes?
KWAME HOLMAN: Republicans also criticized the proposal as simply another attempt by Democrats to raise taxes. Jim McCrery of Louisiana is the ranking member on the House Ways and Means Committee.
REP. JIM MCCRERY (R), Louisiana: ... that if this pay-go rule that governs this bill today stays in place, we're going to increase taxes on the American people, over the next 10 years, $3.5 trillion. Mr. Speaker, that is the largest tax increase in either nominal terms or real terms in the history of this country.
Now, is that what the Democratic majority wants for this country? Do they want to take a chance on increasing taxes to that extent on the American people at a time when we have a housing crisis, when the dollar's value is dropping? I hope not.
Measure passes along party lines
KWAME HOLMAN: But Majority Leader Steny Hoyer said paying for the AMT cut was the responsible thing to do.
REP. STENY HOYER (D-MD), House Majority Leader: Maybe we want to save ourselves a little dollar, but we don't want to pay for it, because raising revenues takes political courage. There is no courage whatsoever in plunging our country into debt, spending and not paying.
KWAME HOLMAN: The measure passed this afternoon along party lines. Members of the Senate also want to patch the AMT, but passing the tax increases there is expected to be difficult.