The Senate Budget Committee yesterday approved a $1.010 trillion discretionary spending plan for fiscal 2009, including a provision to shield millions of additional taxpayers from the alternative minimum tax in the 2008 tax year.
However, unlike the House Budget Committee, the Senate panel does not call for the $70 billion estimated cost to be offset with revenue raising provisions.
The Senate committee approved the so-called budget resolution by a 12-to-10 vote. The panel's action came after the House budget panel passed a corresponding bill early Thursday morning by a vote of 25 to 16 that authorized a $1.014 trillion fiscal 2009 discretionary spending blueprint, including one-year of AMT relief that would be paid for between 2011 and 2013. The measure calls on the Ways and Means Committee, which oversees tax issues in the House, to come up with an AMT offset.
Last year House and Senate Democrats sought to pay for the 2007 AMT patch by requiring that hedge fund, private equity, and other investment managers who share in their investors' profits pay taxes on that income at ordinary tax rates. Currently, they pay the lower capital gains rate on that revenue, which is known as "carried interest." However, Senate Republicans who threatened to filibuster the proposal derailed those efforts.
The AMT, which applies to interest earned on private-activity bonds and some governmental and 501(c)(3) bonds, is designed to target high-income households, which are eligible for so many tax breaks they pay little or no taxes. However, the AMT is not indexed to inflation so more taxpayers become subject to it each year. Congress late last year approved AMT relief for the 2007 tax year.
Both measures would provide more funding than the $992 million in discretionary spending called for by President Bush in his fiscal 2009 budget request. Discretionary funding is doled out through the 12 annual spending bills that Congress approves for various government programs.
The bills now go to the full Senate and House for a vote. If approved, a bicameral conference committee will have to reconcile differences between the two bills and draft a single budget resolution that must also be voted on again by the Senate and House.
Other differences between the two bills include instructions in the House measure for the Ways and Means Committee to reduce federal spending by $750 million over the next five years through a "budget reconciliation" bill, which the committee would have to produce by Sept. 12.
The reconciliation measure also includes language that requires offsetting the AMT patch. House Democrats included the provision in the bill, which cannot be filibustered in the Senate under existing budget laws, in an effort to get the provision through the Senate on a simple majority vote. Republicans oppose paying for the AMT relief because they believe it would amount to a tax increase.