Congress to push ahead AMT tax fix

By Joanne Kenen

WASHINGTON (Reuters) - Top congressional Democrats on Tuesday said they hoped to pass a bill this week that would ensure millions of middle income U.S. taxpayers do not become ensnared by a tax meant for millionaires.

The Democrats, who lack support from fiscal conservatives in their own party because the tax legislation would not pay for the $50 billion cost, would need support from a significant number of Republicans to stop the alternative minimum tax from hitting an estimated 20 to 25 million middle class taxpayers when they file their 2007 taxes.

But several senior Republican aides predicted that the bill would get bipartisan passage before the U.S. House of Representatives wraps up its work for the year in the next day or two.

Kevin Smith, a spokesman for House Minority Leader John Boehner, an Ohio Republican, said he expected most House Republicans to vote for the measure if it's a "clean AMT patch without any tax increases."

The House and Senate, both controlled by Democrats, had passed different versions of the AMT legislation. The Senate bill doesn't pay the $50 billion cost. The House bill pays by closing offshore tax loopholes for hedge fund managers. President George W. Bush has threatened to veto the House bill and the Senate has rejected it repeatedly.

A fiscally-conservative coalition of Democrats, known as the Blue Dogs, restated their opposition on Tuesday night to any bill that doesn't cover the cost. Rep. Allen Boyd, a Florida Democrat who spoke on behalf of the group, said they would reject the tax legislation unless it is paid for. "Any bill that comes to the floor, including a tax bill, should be paid for," he said.

The alternative minimum tax was enacted in 1969 to ensure that the very wealthy had to pay some taxes, but because of the effects of inflation, the tax now threatens to ensnare millions of middle-income families.

If Congress fails to act before the end of the year, around 20 million U.S. taxpayers who otherwise would escape the tax, may end up owing the AMT when they file their 2007 tax return, due by April 15. Congress for years has passed bills granting relief from the AMT on a temporary basis.

(Additional reporting by Thomas Ferraro and Richard Cowan; editing by Carol Bishopric)