On May 5, the House approved, 333-89, a bill (H.R. 4227) to extend for one year alternative minimum tax (AMT) relief that was included in the 2001 Economic Growth and Tax Relief Reconciliation Act (P.L. 107-16). Rep. Rob Simmons (R-CT) sponsored the measure.
The 2001 law increased the AMT exemption to $35,750 for single taxpayers and to $49,000 for married couples. The increase is scheduled to expire at the end of 2004. At that time, the AMT exemption amounts for single and married taxpayers would be $33,750 and $45,000 respectively.
Last year, Congress approved a tax package (P.L. 108-27) that included provisions to temporarily accelerate the implementation of the tax cuts in the 2001 law (see The Source, 5/23/03). Under the law, the AMT exemption was temporarily increased to $40,250 for single taxpayers and to $58,000 for married couples. In 2005, the AMT exemptions will be restored to the pre-2001 levels.
During consideration of H.R. 4227, Rep. Richard Neal (D-MA) offered a substitute amendment that would have temporarily provided an AMT exemption for single taxpayers with an annual income of up to $125,000 and for married couples with incomes of up to $250,000. In 2005, AMT liability would then be phased in for individuals with an annual income between $125,000 and $145,000, and for married taxpayers with an income between $250,000 and $290,000. Under the substitute, the House Ways and Means Committee would be ordered to report legislation by August 1, 2004, providing permanent changes to the AMT exemptions so that the percentage of individuals subject to the AMT would be equal to the level in effect prior to enactment of the 2001 law. The substitute would have been offset by adding revenue-raising provisions “designed to curtail tax shelters” for corporations. The substitute was defeated, 197-228.
Rep. Nancy Johnson (R-CT) said that the bill “is simply about keeping promises, about keeping the promise made to the middle-class taxpayers that we would provide child credits to reduce the taxes on our young families, that would eliminate the marriage penalty, and that we would expand the 10 percent bracket so that those low earners in America would not be burdened with tax liabilities.” She went on to add, “Unless we pass this legislation, we will renege on that promise of lower taxes and effectively increase the taxes of 11 million taxpayers by on average $1,520. I can tell you, that is a lot of money to families in our country. We cut their taxes; and we need to remain loyal to that policy that supports families, recognizes the circumstances of low-income individuals and families in the 10 percent bracket, and eliminates the gross unfairness of the current marriage penalty in our code.”
Rep. Rosa DeLauro (D-CT) disagreed. “Under the Republican bill, 1 million families would still be paying the AMT. A two-income family with four children in a high-tax State would be hit by the alternative minimum tax even if their income is only $95,000. And their bill would extend AMT relief for just 1 year meaning taxes on millions of middle class families will go right back up in 2006.” She explained that the Democratic substitute “completely exempts married couple families with incomes under $250,000 from the alternative minimum tax, providing tax relief to more than 10 million families, particularly those with children in high-tax States. Compared to the Republican bill, it provides more relief to 1 million additional families.”
