Rep. Charlie Rangel, D-N.Y., has proposed a plan to eliminate the alternative minimum tax, designed in 1969 to ensure wealthy Americans paid their fair share of taxes but which was never indexed for inflation. Rangel and Rep. James McCrery, R-La., debate the tax plan.
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Next, repealing the alternative minimum tax. Margaret Warner has that story.
The alternative minimum tax, or AMT, was created in 1969 to make sure the super-wealthy didn't use tax loopholes to avoid paying their fair share. A parallel tax that cancels out many deductions, the AMT forces taxpayers to calculate two tax bills and pay the higher amount.
But it was never indexed for inflation and now, nearly 40 years later, threatens some 20 million households with higher taxes this year. Both parties have said they want to scrub it, even though it is expecting to generate $800 billion in revenue over the next decade.
Last week, Representative Charlie Rangel, chairman of the House Ways and Means Committee, unveiled a plan to eliminate the AMT and pay for it with a broad tax code overhaul. His plan includes some tax cuts, like a larger standard deduction; expansion of the earned income and child tax credits; and a reduction in the corporate tax rate from 35 percent to 30.5 percent.
And it includes tax hikes, including: a surtax on married couples earning more than $200,000; higher tax rates for hedge funds and private equity firms; and repeal of special business tax breaks, like one for profits on domestic manufacturing.
For more on the AMT and Chairman Rangel's proposal for fixing it, we turn to Congressman Rangel and Representative James McCrery, ranking Republican on the Ways and Means Committee.
And welcome, gentlemen. Thank you for being with us.
Congressman Rangel, let's begin with you. What is so dreadful about the AMT that both parties despise it and want to scrap it?
REP. CHARLIE RANGEL (D), New York: Well, it is just so unfair. It was not intentionally done by the Congress, certainly not before the Ways and Means Committee.
Both Jim and I agreed early on that we should not just think in terms of delaying it for another year. We should abolish it, because it's an unfair burden on 23 million people who, because of inflation, got pushed up in this category.
The real question is, with my overall reform bill, which would of course abolish it, we cannot complete that on the floor in time to prevent the AMT from going into effect next year. So where we are right now, the House, the Senate, the Republicans and Democrats and the president, want us to temporarily at least put it off for another year.
The big battle is that most of the Republicans, I think, want to borrow the money. And we believe the democratic way to do it is to pay for what we're doing by closing loopholes and get it behind us at least for a year.