Townhall.com

Wednesday, November 14, 2007

Time is running out. If Congress does not enact an Alternative Minimum Tax patch by the end of this week, as many as 50million American taxpayers could face a delay of up to 10 weeks getting their tax return checks next year.  But even with tens of milions of taxpayers under the gun, House Democrats refused to pass a bill that President Bush will sign into law, and Senate Democrats-well, they aren't planning to do anything at all.

For the past several years many in Congress have been concerned about the growing problem posed by the Alternative Minimum Tax. Designed to secure taxes from a handful of millionaires, its' impact now threatens to reach deep into the middle class.  But while the theoretical impact of the tax law and CBO baseline-has been growing, Republicans have shielded all but a handful of Americans from its effects with a series of temporary "patches".

Unless a "patch" is put in place for 2007, 23 million taxpayers will be subject to the AMT for their 2007 income, and will face an average tax increase of $2,000.  When Republicans were in the Majority, we never waited later than June to pass this important protection for taxpayers. Now, we are nearing the middle of November, and Democrats have not enacted a "patch."

A few weeks ago, Iowa Senator Chuck Grassley, the senior Republican on the Senate Finance Committee, and I sent a letter to Secretary Hank Paulson to ask what the impact of delay will be for taxpayers. According to the Treasury Department, that impact is substantial.  They found that a total of nearly 50 million taxpayers could have $75 billion worth of tax refuds delayed for up to 10 weeks.  This is, in effect an interest-free loan from the American people to their government.

So we face a strict deadline this Friday.  IRS forms must be sent to the printer by November 16.  If we enact a patch after that, those forms must be pulped, re-printed, and re-mailed at a substantial cost to taxpayers.  Further, it takes months to program the IRS computers, so every day we wait to get the "patch" into the tax law means tax return checks will go later.

Sen. Max Baucus, the Chairman of the Senate Finance Committee, Sen. Grassley, House Ways and Means Chairman Charlie Rangel and I have sent a letter to the IRS explaining that we all hope and expect to get AMT "patch" legislation enacted this year, but the IRS has been very firm: they cannot begin correcting their forms and re-programming their computers until the "patch" is actually law.

As we learned in Civics class, in order for a bill like AMT "patch" to become law it must pass both Houses of Congress and be signed by the President.  Last week, Democrats passed an AMT "patch" through the House of Representatives, but the legislation- which includes both the AMT "patch" and a package of $80 Billion in tax increases- is dead on arrival in the United States Senate, and even if it somehow passes there, the President has promised to veto it.

The problem is Democrats' so-called  "paygo" rule, which ostensibly requires that a tax cut must be "paid for" with either a tax increase or a spending cut.  In practice, House Democrats have shown zero appetite for spending cuts and have already raised taxes by over $100 billion this year.  The paygo rule is flawed policy in a number of ways, but it has a particularly twisted effect when it comes to the AMT "patch".

Everyone agrees that the federal government was never intended to receive AMT revenue from the middle class.  Thanks to the "patches" that Republicans have kept in place since 2001, the federal government has received AMT revenue from the middle class.  But, according to the Democrats' logic, maintaining this status quo-in effect, preventing a $50 billion tax increase- must be "paid for" with other tax increases.  Thanks to this "Alice in Wonderland" application of their paygo rule, they are actually raising taxes to prevent a tax increase.

That is nonsense.  We are faced with a clear problem that has a clear solution.  If we fail to act promptly, 50 million taxpayers face what Sen. Grassley has aptly dubbed, "a filing day fiasco."

Congress should not leave for Thanksgiving without providing AMT relief, and there is no need to hold American taxpayers hostage by adding tax hikes to AMT "patch."