WASHINGTON - While he strongly supports protecting taxpayers from the ever-expanding burden of the Alternative Minimum Tax (AMT) and has introduced a bill to repeal the AMT once and for all, First District Congressman Paul Ryan today voted against a harmful plan that uses permanent tax hikes on businesses and individuals to delay for one year the full imposition of the AMT. This legislation (H.R. 3996), which passed the House by a vote of 216-193, raises $76 billion over 10 years through tax increases that would discourage investment and hurt the competitiveness of U.S. businesses in the global economy, in order to delay an unintended AMT tax increase for one year and provide other temporary benefits such as one-year extenders of certain tax credits and deductions.
The legislation is based on the faulty premise that the government is entitled to the increasingly higher tax revenues that are forecast to pour into the federal Treasury due to the AMT - even though the AMT was never meant to generate such revenues. When the AMT was created in 1969, it was aimed at preventing 155 wealthy taxpayers from exploiting loopholes in the tax code to escape their legitimate tax obligations. However, partly because it was never indexed to account for inflation, the AMT next year will subject over 20 million more taxpayers to an automatic tax increase - hitting many middle-income Americans with a stealth tax increase that was never intended.
Congressman Ryan tried to offer an amendment to H.R. 3996 that would have allowed the one-year AMT patch to move forward without raising taxes; however, his amendment was not allowed to be considered on the House floor.
"Congress needs to act quickly to stop a huge AMT tax hike, but today's bill that relies on permanent tax increases to patch the problem for a year is just bad policy. When it comes down to it, the plan would still make taxpayers pay for the government's mistake, and that's wrong," Ryan said. "We need a permanent repeal of the AMT or, at the very least, a short-term fix that will prevent this illegitimate tax hike from hitting more and more families next year. But raising taxes to stop an AMT tax increase makes no sense, and this circular logic hurts America's economy. If our businesses are going to compete successfully around the world, they need a tax code that encourages investment and job creation - not one that raises taxes whenever it needs to correct the government's past mistakes."
"This tax hike bill is also troubling because it is essentially a down payment on a much larger tax increase proposal that House Ways and Means Committee Chairman Rangel recently introduced. The larger plan has been called the Mother of all Tax Reforms' but really should be known as the Mother of all Tax Hikes' because it would raise taxes by $3.5 trillion over 10 years - the largest individual income tax increase in history. If this is allowed to occur, the federal government would end up consuming an ever-growing share of the American economy. Instead of keeping tax revenue around its historical level of about 18.3 percent of the economy, federal taxes would consume roughly one-fourth of U.S. economic resources by mid-century," Ryan said.
In addition to the policy-related problems inherent in the legislation, by bringing up H.R. 3996 - instead of a "clean" AMT patch that the Senate would be more likely to pass and the President to sign - the Democratic House leadership risks delaying taxpayer refunds and costing the government millions of dollars. The Senate has sent clear signals that it does not intend to take up this bill in its current form, and Rep. Jim Cooper (D-Tenn.) acknowledged this earlier in the week when he was quoted saying: "This is a 130-percent tax increase, and we know it's going nowhere in the Senate." The Democratic Senate majority has already announced that they will not consider this bill.
Delaying passage of a viable AMT patch threatens to cause chaos during the upcoming tax filing season. In a letter to Ways and Means Committee Ranking Member McCrery, Treasury Secretary Paulson cautioned that enactment of a patch in mid-to-late December "could delay issuance of approximately $75 billion in refunds to taxpayers who are likely to file their returns before March 31, 2008." These delays could impact up to 50 million taxpayers, half of whom are not even subject to the AMT.