Lugar Urges Action to Prevent Higher Taxes

Press Release

U.S. Sen. Dick Lugar today urged Senate Democratic Leader Harry Reid to swiftly bring legislation to the Senate floor that would ensure that Hoosiers do not face higher tax bills. He specifically called for the Senate to take action to adjust the Alternative Minimum Tax (AMT) exemption levels and index them for inflation prior to the end of the year in order to prevent thousands of Hoosiers from paying significantly higher taxes in 2010.

"Given the state of our economy and the high unemployment rate, any additional tax burden, especially on the middle-class, would be irresponsible," said Lugar. "Accordingly, I am calling on Senator Reid to immediately bring to the Senate floor legislation that will give financial relief and certainty to Hoosier taxpayers by adjusting the AMT exemption levels for inflation, or eliminate the AMT altogether."

The AMT, which was first adopted in 1969, now affects far more Americans than initially intended. It was instituted to ensure that a small number of high-income households would not be able to escape federal tax liability by taking advantage of tax breaks and loopholes. However, key provisions of the AMT were not indexed for inflation, and as a result, it has covered an ever-increasing number of middle-class taxpayers. In response, Congress routinely passes AMT patches that index the AMT to inflation.
Absent Congressional action, the number of American taxpayers affected by the AMT will significantly increase from 4.5 million in 2009 to 27.2 million in 2010. According to the Congressional Budget Office, those impacted by the AMT will pay on average an additional $3,900 in tax in 2010.

If an AMT patch is not completed until early in 2011, tax refunds for 2010 could be delayed for the 21 million taxpayers that are no longer subject to the AMT as a result of the patch. In a recent letter to the Senate Finance and House Ways and Means Committees, IRS Commissioner Douglas Shulman said, "…it would be an unprecedented and daunting operational challenge to open the tax filing season under one set of tax laws with respect to AMT and extenders, begin accepting tax returns, and then have the law change. Re-programming systems and publishing new forms and instructions in the middle of filing season would introduce significant operation and compliance risks."

In his letter, Commissioner Shulman indicated that the strain on operations would also "spill over into service disruptions and/or delayed refunds for tens of millions of other taxpayers."

During the 109th Congress, Lugar introduced legislation that would have raised and indexed the AMT exemption amounts and allowed the standard deduction, the personal exemption, and the non-refundable personal credits when computing AMT liability.

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