Senate Republicans, Democrats Continue to Squabble Over AMT

Negotiations on a so-called patch for the alternative minimum tax remained stalled yesterday, with Republican and Democratic leaders on the Senate floor blaming one another for blocking action on the ballooning tax threat. Senate Finance Committee chairman Max Baucus, D-Mont., indicated Tuesday that the most feasible compromise for the Senate, at this point, is a non-offset, one-year AMT patch and a fully offset two-year extension of expiring tax breaks and provisions. The latter package is thought to include extensions of both the qualified zone academy bond program and the optional deduction for state and local sales taxes.On the Senate floor yesterday, Baucus expressed willingness to consider a stand-alone AMT patch as well. “Let’s bring up AMT, not paid for, alone,” he said. “Will Republicans still object to that? So far they have.”Congress has “patched” the AMT, or prevented it from applying to new taxpayers, for the past several years because the tax’s exemption levels are not indexed to inflation. If lawmakers do not enact a patch this year, roughly 23 million more people will have to calculate their tax liability under the secondary structure, compare it to their normal tax liability, and pay the higher amount to the Internal Revenue Service.While Congress’ action on previous-year patches has often come down to the wire, the situation appears to be worse this year under the Democratic Congress’ pay-as-you-go rules, which require all new measures to be counterbalanced by revenue-raising provisions, such as new taxes. Republicans argue that the 2007 AMT patch, or even a full repeal, should not be offset because the tax was never meant to apply to so many taxpayers in the first place.The House has already passed fully offset AMT relief and extenders legislation, which Senate Republicans say they cannot support.“The House has shown it does not respect the need to get 60 votes in the Senate, and I don’t expect that to change,” Senate Finance Committee ranking member Charles Grassley, R-Iowa, said yesterday.Even the Senate reached a compromise on the patch, its future in the House is questionable at best. The fiscally conservative Democratic Blue Dog Coalition, a group of 47 House members, was quick Tuesday afternoon to denounce the possibility of passing a patch without revenue raisers.“Waiving [pay-go] rules in the face of tough decisions and political pressure is fiscally reckless, an abdication of our duties, and frankly a broken promise,” coalition co-chair Rep. Allen Boyd, D-Fla.Senate Majority Leader Harry Reid, D-Nev., said the Senate could vote on some form of an AMT package today if it did not reach an agreement last night.