MS. HERERA: Fixing the AMT. It is a problem that we've talked about over and over again on this program and we may, indeed, get a vote on something that is attempting to fix the AMT in just a short while.
Joining us now are two members of the Ways and Means Committee, Congressman Richard Neal, who is also chairman of the Select Revenue Subcommittee and Congressman Paul Ryan, ranking member of the Budget Committee and one of those proposals would raise taxes on private equity firms to try and fix the alternative minimum tax, which affects millions of Americans.
Congressman Neal and congressman, both welcome to you. I'll start with you, Congressman Neal, a lot of people think why impose another tax to fix a faulty tax.
REP. NEAL: We're proposing a tax cut for 25 million people. I think that that's the reality of the situation. I don't think that we ought to be governed by theology here. I think we should be governed by what works. Twenty five million people get tax relief this afternoon under our proposal.
MS. HERERA: Representative Neal, I agree with you. Get rid of that AMT. We should just abolish it completely, but at the same time why do you want raise taxes on private equity?
REP. NEAL: Because we need to pay for it. The argument that we offered in just a couple of seconds by my very good friend, Paul Ryan, in the Republican caucus is essentially this. Let's borrow the money. We have now borrowed almost $600 billion to annually patch the AMT.
MS. HERERA: Why don't you just cut spending?
REP. NEAL: Well, why don't we stop borrowing the money for the war in Iraq -- $2.5 billion a week?
MS. HERERA: That's a great way to cut spending.
MS. MICHELLE CARUSO-CABRERA: Congressman Ryan, is that indeed that the case, that borrowing the money is your solution to it?
REP. RYAN: Well, Sue and Michele, I think you just identified my solution. We don't have a revenue problem in Washington; we have a spending problem. Let's cut spending. But here's the problem with the logic that my friend, Richie, is employing. Two wrongs don't make a right. This is a law that Congress never should have passed in the first place. It was a mistake Congress made. We should just repeal it and not raising taxes is not cutting taxes. It's not raising taxes.
So preventing the AMT from hitting 26 million people is not reducing their taxes. It's just preventing them from having a massive tax increase and substituting that tax increase for another tax increase, bringing all this extra money into the federal government is not what we should be doing. We should be focusing on controlling spending instead. We should totally repeal the AMT. That is what we're doing.
This whole issue is a charade. It's not going anywhere in the Senate. It's going to get vetoed even if it made it to the president's desk, and we all know at the end of the day we're just going to pass the AMT without raising taxes to do so.
MS. HERERA: Is that the case, Congressman Neal?
REP. NEAL: What we're doing here is simply this. We're providing tax relief for 25 million Americans. But your two good minds as it relates to financial services ought to play out like this. Why would we borrow $61 billion again this year to pay for AMT relief? And what Paul is suggesting here and I want you to think of this when he says let's just eliminate AMT. The cost of that is one trillion fewer dollars in the federal treasury over the next decade. Our position here, fiscally, is entirely responsible.
REP. RYAN: There's a different premise here, and I just want to be fair. He's saying over a trillion dollars of lost revenue. This is $1 trillion coming into the government the government never planned on getting in the first place.
MS. HERERA: Exactly.
REP. RYAN: The AMT is a tax increase on top of a tax code we have. Let's get rid of this tax. It's anti-growth. It's anti- competitive. It brings government spending and taxing to whole new levels that we've never seen in this country before.
MS. CARUSO-CABRERA: But Congressman Neal, isn't that what I asked you at the beginning? It's a tax on top of another tax to take care of a tax.
REP. NEAL: It's not a tax on it. We're cutting taxes for some and asking others to pay more, including private equity managers. Why should they pay at a 15 percent rate on ordinary income?
MS. HERERA: Because they bear tremendous risk and they lose a tremendous amount of money when they get it wrong.
REP. NEAL: And the two of you, including most of us here, we're paying up to 35 percent on income.
MS. HERERA: But to Michele's point, we're not assuming the risk. We're not taking over companies that otherwise would be bankrupt and assuming the risk that that it implies.
REP. NEAL: I thought risk was something we did with our own money, not with somebody else's.
REP. RYAN: They can put their own money -
MS. HERERA: Exactly. That's why you should be lowering taxes.
REP. NEAL: That's a very important consideration.
REP. RYAN: This is three on one and I want to be fair to my friend, Richie, here. This is a foreshadowing of the fight that's yet to come in the next session in Congress.
What this bill does is it paves the way for Charlie Rangel's bill, which replaces the alternative minimum tax with a new 45 percent top tax rate. That's what the ultimate goal here is is get rid of the AMT, but get that money into the government. This kind of money we've never seen before and bring us to a new top tax rate of 45 percent.
REP. NEAL: Incidentally -
REP. RYAN: This the goal here and this is a foreshadow of that fight.
REP. NEAL: One footnote that I think is very important. Every budget that George Bush has submitted has included revenue from AMT to seek balance.
MS. HERERA: And I don't agree with that either. You know, Michele and I will come down to Washington and we'll all sit down and hash it out.
REP. NEAL: You'll be most welcome.
MS. HERERA: Thanks very much gentlemen for joining us. We appreciate it.