This Year’s Last AMT Update

This morning the NYT is running a story by David M. Herszenhorn called “Congress Averts Higher Tax Bill for Middle Class” and it provides the final chapter to this year’s repeated attempts by congres to prevent the AMT from hitting the estimated 25 million middle-class people it was never designed to hit.

The tax reprieve postpones for one year only an expansion of the alternative minimum tax, a parallel tax system enacted in 1969 to prevent very wealthy investors from using deductions and tax shelters to avoid paying income tax altogether. The alternative tax has ensnared a growing number of middle-class Americans in recent years because the 1969 law was not indexed to inflation.

Without the fix by Congress, some 25 million filers would have had to pay the tax on their 2007 income, up from four million who paid it on 2006 income, according to the White House.

[…]

The vote on the alternative tax plan came on the final day of the first session of the 110th Congress, which ended with a burst of last-minute legislation including final adoption by the House of a $555 billion budget package.

But it was the tax plan that gave a discordant note to the last day before the holiday recess.

House Democrats angrily approved the bill after giving in to demands by Congressional Republicans and Mr. Bush that the tax cut not be offset by raising other taxes.

In other words, its not revenue neutral… Its going to leave about a $50 billion dollar hole.

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