Thursday, December 6, 2007: Minority shows its power as Republican AMT fix goes through

[20:17]
The Senate has adjourned.

[20:13]
Earlier tonight (at 18:23) the Senate passed a one-year AMT patch by a vote of 88-5. The Democrats capitulated to a Republican filibuster and joined their colleagues to pass an amended version of HR 3996, the AMT patch.

Senate Republicans refused to agree to offset provisions in the House version that would have introduced higher taxes on private equity income to pay for the putative loss of AMT revenue.

Knowing that they could not afford to be seen as the party that subjected an additional 21 million taxpayers to the mutating AMT, Democrats abandoned their fealty to pay-go and passed a "clean" AMT fix.

As of this moment, I have been unable to determine what effect the Senate version of the bill would have on a package of tax credit extenders for things like research and development and teacher-bought school supplies. Does the Senate-passed bill address these extenders? If so, does it offset the cost of them? Anyone?

The House must now hold a vote on the Senate version of the AMT fix. If given a chance to vote on the Senate version, the House would easily pass it. The question, then, is whether House Speaker Pelosi will bring the measure to the floor of the House.

Hesitant to have themselves portrayed as abandoning their 2006 campaign pledge of "pay-as-you-go," some House Democrats have vowed to oppose an AMT fix that is not paid for with tax increases in other areas.

The House version offsets the loss of anticipated AMT revenue by treating income reaped from private equity ventures as ordinary income instead of capital gains.

It is arguable that a clean version of the AMT patch is not necessarily violative of the pay-go principle. Consider that the revenue anticipated by an AMT expansion has never been seen by the government. It's not as though the government is suddenly not receiving money that it is used to receiving. Democrats could point this out to mitigate their failure to pass offsets on the AMT fix.

Congress agreed to an Alternative Minimum Tax in 1969 as a way to ensnare rich taxpayers who were loading their returns with deductions in order to avoid a tax bill. Unfortunately, that original AMT legislation is not indexed for inflation.

Hey, $100k doesn't go as far as it used to.

Voting against the "clean" version of the AMT patch were Carper, Conrad, Dorgan, Feingold, and Whitehouse.

Earlier today, a Republican filibuster withstood a cloture vote on the House-passed version. That filibuster forced Democrats to bring a clean version of the AMT fix to the Senate floor.

[17:27]Since this morning's vote against a proposed AMT patch, the Senate has been quiet. There have been some miscellaneous speeches from Murray, Casey, Klobuchar, and Stabenow but there isn't much work on the floor. Presumably, senators are working behind the scenes to reach an agreement to bring something to the floor. Right now Debbie Stabenow (MI) is talking about the numerous Republican filibusters this year. She notes that there will be a cloture vote on the Farm Bill tomorrow. This will be the second attempt to break a Republican filibuster of the Farm Bill.

Proposed AMT Fix Fails in Senate

Earlier today, Republican senators defeated a motion to limit debate and proceed to consideration of an Alternative Minimum Tax (AMT) patch that would have prevented the AMT from affecting more taxpayers this year than it did last year.

Needing sixty votes, the cloture motion received only 46.

Estimates are that the AMT could affect as many as 25 million taxpayers this year, while it reached only 4 million taxpayers last year. Senator Charles Grassley (IA) said that it ups the average taxpayer's bill by $2,000.

Republicans have opposed the House-passed one-year AMT fix because it offsets the putative loss of tax revenue by raising other taxes. I have not heard or read what these tax hikes would be.

So, there is an impasse on the AMT fix. Democrats say they will not pare back the AMT tax without paying for it. And Republicans refuse to agree to an AMT fix that raises other taxes.

The House-passed version includes not just an AMT fix but it also extends verious tax credits for teachers and research and development. Thus, the tax hikes attached to the AMT fix are in the total amount of $80b, $50b for the AMT and $30b for the so-called "extenders."

Max Baucus (MT), chairman of the finance committee, thought he had a deal worked out whereby the legislation would include $30b of new taxes to pay for the extenders but no offset for the AMT fix. He figured this could work as a compromise.

It doesn't seem anyone besides Baucus is very interested in that deal. Republicans still appear adamant in their refusal to entertain any sort of new tax and Democrats including the House Blue Dogs refuse to abandon the pay-go fiscal pledges that go them elected in 2006.