Posted on 11/07/2007 10:56:10 AM PST by Graybeard58
WASHINGTON — For the first time since 2001, it’s not clear that Congress will pass an annual temporary “patch” in time to prevent the creeping Alternative Minimum Tax from forcing up tax payments for millions of unsuspecting middle-class taxpayers.
In addition, if Congress doesn’t “patch” the AMT tax within 10 days — and it appears highly unlikely to do so — then the partisan bickering among lawmakers could delay tax refunds next year for tens of millions of Americans.
Democrats in control of Congress pledge to do as Republicans have done in recent years and prevent the AMT from hitting an additional 19 million American taxpayers. About 4 million tax filers paid the AMT on 2006 income.
Democrats in the House of Representatives promise to freeze the AMT at current levels. That would deny the Treasury some $80 billion in anticipated revenues. To make up that lost revenue, Democrats propose to close tax loopholes on rich investment-fund managers and raise other taxes. Their goal: to patch the AMT in a way that’s budget neutral.
When Republicans ran Congress, they passed annual patches to keep the AMT from hitting middle-class taxpayers, but they didn’t make up for the lost revenue. They simply expanded the federal deficit.
Now they're pledging to fight any new taxes to pay for the AMT patch.
Even some key Senate Democrats oppose the House Democrats' proposed tax hikes. And the chairman of the tax-writing Senate Finance Committee hasn’t said how he’ll offset the revenue loss.
This wouldn’t be a problem if it weren’t November. The Internal Revenue Service set a Nov. 16 deadline to finalize forms and instructions for the 2008 tax filing system. But Senate Majority Leader Harry Reid, D-Nev., told reporters Tuesday that he won’t move an AMT patch before Thanksgiving.
By missing the Nov. 16 deadline, lawmakers will mess up the timely issuance of tax refunds for millions of taxpayers. The IRS and Treasury Department estimate that a patch not passed by early December could delay issuance of $75 billion in refunds to taxpayers who file their 2007 tax returns before March 31, 2008.
Additionally, there are 12 tax forms — one for the AMT and 11 others for various tax credits — that would be affected by the delay. Only several weeks after an AMT patch is enacted can the IRS begin sending updated tax forms to libraries, post offices and other distribution centers. The first day of the tax filing system is Jan. 14, 2008, so processing delays on tax returns appear almost certain.
The House of Representatives votes Thursday or Friday on the proposed one-year AMT patch. Then it’s on to the busy Senate and a less-certain future.
“I think the folks that are using the term ‘train wreck’ are being very precise,” said a Senate Republican staffer close to the tax-writing process. The staffer, who spoke anonymously because he wasn’t authorized to speak to the media, said the Senate’s backed up with votes still to come on a controversial farm bill, several spending bills and a continuing resolution to fund government operations.
Still, tax policy veterans expect a late-hour patch.
“I would bet it’s going to happen because nobody wants to go home at the end of the year and have that many people fall under the clutches of the AMT,” said Roberton Williams, a tax expert at the center-left Tax Policy Center in Washington.
Among the most harmed are Americans who file estimated tax payments on a quarterly basis. They could end up underpaying and be liable for more if the AMT patch doesn’t get done by year’s end.
Not surprisingly, the uncertainty means business for accountants.
“We’re seeing more clients coming in for tax planning, and we’re delighted because tax planning done before the end of the year allows clients to help minimize their tax liability,” said Gregg Wind, a certified public accountant in Los Angeles.
He added, “It’s really important that if you do have a large capital gain, if you sold a piece of property or live in a state with high tax rates — that you consider having a tax professional prepare a tax projection.”
ON THE WEB
A primer on the Alternative Minimum Tax, or AMT.
An example of how the AMT threatens a middle-class family.
More on the House Democrats AMT patch.
The Republican response on the AMT patch.
I’m not for the Democrats raising taxes on any level, but if Republicans get blamed for not allowing the AMT patch...that’s big trouble at election time. Most people don’t have a clue about the AMT, but when they get their taxes figured next year (if the patch isn’t enacted) they’ll know about it, and they won’t be happy.
If Charlie Rangel doesn’t bring it up how can the Republicans be blamed for not patching it?
Oh poor blue staters might have the pay the AMT, that was started by their party.
Crimea River.
Which in turn means the AMT patch might not be passed because the Republicans refused to "cooperate." That's how they'll be blamed...and don't think that the Dems won't be shouting it from the rooftops that the Republicans were the ones that forced the AMT on the middle class (look into it, it's not a "small" amount that each household will have to cough up in additional taxes if the AMT patch isn't enacted.) That's why the Republican source quoted said it was a train wreck.
I started to write the same thing that you did but was just too frustrated.
In the past when I have had an income reduction for any reason, it's the first thing that occurs to me and it should be to any responsible individual but since congress is playing with other peoples money, it never occurs to them and it doesn't matter a lot if the congress is republican or democrat.
LOL! There you go, James, waxing all reasonable like!
Hmm this could be a very fine campaign issue aaert from the AMT issue itsel
...Come 2008 Your tax refund of your money delayed because of your Democrat Run Congress.
Who had the Presidency, and control of the House and Senate that put the AMT into law?
Well, it's a certainty it was democrats who wrote the law and passed it, but I was a bit surprised it was proposed during the LBJ admin. It just has all of the hallmarks of a stupid Nixon type law.
I am surprised also as I was sure it was passed during Carter’s debacle.
Too bad the GOP was too busy spending like drunken sailors when they controlled both houses of Congress and the White House. If they’d taken a break from increasing spending, they might’ve passed a permanent fix to the AMT and thus avoided this problem.
I’ve read conservative sites (National Review) policy analysts who say let the AMT become the new flat tax. No deductions, no exemptions to speak of... no progressive rates... just a flat tax.
It was written after an overly dramatic “expose” of 21 people who earned a lot but paid no taxes. Look how many people are caught in it now, because it’s not naturally indexed (Congress keeps kicking it down the road with a patch).
That’s what makes it so infuriating. It was supposed to “catch” just a few people. Now millions are going to be screwed by it. I hate the republicans for not making a big stink about this.
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