WASHINGTON (Reuters) - As millions of Americans rush to file their annual income tax returns before the April 17 deadline, Democrats on Saturday promised to push to keep middle-class families from paying a tax originally intended for the very wealthy.
The alternative minimum tax, initially intended to ensure that the rich could not take so many deductions and credits that they paid no federal income taxes, will hit some 23 million taxpayers next spring when they file their 2007 income tax returns unless Congress takes action.
“This tax now affects schoolteachers, firefighters, police officers. It was never intended to be that way,” said Rep. Rahm Emanuel, an Illinois Democrat who sits on the tax-writing Ways and Means Committee in the U.S. House of Representatives.
“Middle-class families making between $75,000 and $100,000 are now more likely this year to pay the tax than those making more than a million dollars,” Emanuel said in the weekly Democratic radio address.
Congress has been enacting a series of temporary measures to keep more middle- and upper middle-income taxpayers from paying the AMT, and President George W. Bush proposed another one-year fix in his 2008 budget submission to Congress.
House Ways and Means Committee Chairman Charles Rangel has said he will push for permanent AMT relief for those taxpayers who were never meant to pay it. The problem is a cost of at least $50 billion a year to the federal Treasury at a time of war outlays and big budget deficits.
About 4 million taxpayers paid the AMT in 2005, according to the latest available data from the Internal Revenue Service. That number could grow to 30 million in a few years.
White House Budget Director Rob Portman told Reuters last week he would like to see a long-term fix to the AMT, but acknowledged the difficulty.
“It’s a harder issue than it seems,” he said.
House Democrats want a solution that does not add to the deficits and that will mean raising revenue by closing tax loopholes and possibly raise taxes on others, which would make it hard to win support from congressional Republicans.
“We will work with our Republican colleagues to identify bipartisan solutions that help middle-class families avoid this tax that was never intended for them,” Emanuel said. “This is the one thing on which Democrats and Republicans should agree.”
Emanuel also said reforming the AMT, which forces people to calculate their taxes under two different sets of rules, would be a major step forward in simplifying the tax code.
Additional reporting by Richard Cowan