‘AMT patch’ passed by Congress

About 21 million taxpayers will be spared the pain of the alternative minimum tax for the 2007 year after the House of Representatives approved an “AMT patch” yesterday by a vote of 352-64.
The Senate has already approved the bill, and it now goes to President Bush, who has said he would sign it into law.
But because wrangling between Democrats and Republicans over raising taxes to offset the $53 billion cost of the bill went to the last minute, the Internal Revenue Service has said as many as 15.5 million tax refunds totaling $39 billion will be delayed next year.
It takes at least seven weeks for the IRS to reprogram their system to take into account changes in the tax law.
The average tax increase under the AMT would have been $2,000 a person.
The AMT was enacted in 1969 to prevent the 155 richest Americans from avoiding taxes due to tax deductions in effect at the time.
However, the AMT, a separate tax system that must be calculated in addition to the regular income tax system, was never indexed for inflation, and many middle- and upper-middle income taxpayers are now subject to it unless Congress acts each year.
Democrats wanted to raise taxes permanently by $82.5 billion for hedge fund and private equity managers to pay for the measure, but Senate Republicans were able to block that.
Republicans argued that the AMT was never intended to be collected from so many taxpayers, and enacting a permanent tax increase was unnecessary.
Congress may take up its “pay-go” rules next year as a result of the difficulties in enacting the AMT patch this year.