[Congressional Record Volume 152, Number 61 (Wednesday, May 17, 2006)]
[Senate]
[Pages S4700-S4701]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY:
  S. 2826. A bill to amend the Internal Revenue Code of 1986 to extend 
and expand relief from the alternative minimum tax and to repeal the 
extension of the lower rates for capital gains and dividends for 2009 
and 2010; to the Committee on Finance.
  Mr. KERRY. Mr. President, today, President Bush is signing H.R. 4297, 
the Tax Increase Prevention and Reconciliation Act of 2005. I opposed 
this legislation because it contains the wrong priorities for America--
leaving behind working families and substantially adding to the 
deficit. This law chooses to extend the lower rates on capital gains 
and dividends for 2009 and 2010, but only addresses the individual 
alternative minimum tax (AMT) for 2006.
  According to the Joint Committee on Taxation, those earning $200,000 
or more will receive 84 percent of the benefit of the capital gains tax 
cut and 63 percent of the benefit of the dividends tax cuts. According 
to the Congressional Budget Office, 42.8 percent of taxpayers with 
income between $50,000 and $100,000 will be impacted by the AMT if the 
AMT is not addressed for

[[Page S4701]]

2007--a number that increases to 66 percent by 2010. The Tax Increase 
Prevention and Reconciliation of Act of 2005 extends a tax cut that 
does not expire to the end of 2008 with a price tag of $50 billion, but 
fails to protect the hard working families that will be impacted by the 
AMT. These families were never intended to be impacted by the AMT, a 
tax originally designed to prevent a small number of high income 
taxpayers from avoiding taxation.
  Today, I am introducing legislation that will address the AMT for 
2007 and repeal the lower tax rates on capital dividends for 2009 and 
2010. To calculate the AMT, individuals add back certain ``preference 
items'' to their regular tax liability. These include personal 
exemptions, the standard deduction, and the itemized deduction for 
state and local taxes. From this amount, taxpayers subtract the AMT 
exemption amount, commonly referred to as the ``patch'' which reverted 
to lower levels at the end of 2005. H.R. 4297 increased and extended 
the patch for 2006. The patch was increased in order to hold the same 
number of taxpayers harmless from the AMT in 2006 as in 2005.
  The problem with the AMT is that while the regular tax system is 
indexed for inflation, the AMT exemption amounts and tax brackets 
remain constant. This has the perverse consequence of punishing 
taxpayers for the mere fact their incomes rose due to inflation.
  A choice was made in 2001 to provide more tax cuts to those with 
incomes of over one million dollars rather than addressing a looming 
tax problem for the middle class. The Economic Growth and Tax Relief 
Reconciliation Act of 2001 did include a small adjustment to the AMT, 
but it was not enough. We knew at the time that the number of taxpayers 
subject to the AMT would continue to rise steadily. The combination of 
lower tax cuts and a minor adjustment to the AMT would cause the AMT to 
explode. We are now approaching this explosion.
  My legislation extends and expands the AMT exemption amount for 2007 
to prevent additional taxpayers from being impacted by the AMT. Without 
increasing and extending the AMT exemption for 2007, an additional 3.2 
million taxpayers will be impacted by the AMT in 2007. In addition, the 
legislation will allow nonrefundable personal credits such as the 
higher education tax credits and the dependent care credit against the 
AMT for 2007. This legislation is offset by repealing the lower rates 
on capital gains and dividends.
  My colleagues in the majority argue that the extension of the capital 
gains and dividends benefits is necessary to provide investor 
certainty. But I believe that the certainty of working families worried 
about paying the AMT should come first. New data from the Joint 
Committee on Taxation requested by the Ways and Means Democratic 
Members shows that in 2007, 62 percent of all taxable capital gain 
income will be recognized by taxpayers liable for the minimum tax. 
Simply put, taxpayers forced to carry the AMT burden will not benefit 
from the lower capital gains and dividends rate.
  The AMT is a looming problem that is impacting hard-working families 
and for each year that we fail to address the AMT, it gets worse and 
more expensive. We need to address the AMT for 2007. My legislation is 
not a long-term cure to the AMT crisis, but it will provide certainty 
for next year to hard working families that will be impacted by the AMT 
just because of where they live and the number of children they have, 
and it will address the AMT in a revenue neutral manner for 2007 as 
well.
  The Tax Increase Prevention and Reconciliation Act of 2005 addresses 
the AMT for 2006, but at a price--providing a $42,000 tax cut to those 
making more than a million dollars a year. The AMT for 2006 could have 
been addressed in a bill that did not include the extension of 
additional tax cuts and it could have been offset. Instead, addressing 
the AMT for 2006 was included in a bill that will add far more than $70 
billion to the deficit.
  We all agree that the AMT should not be impacting families with 
incomes below $100,000. I am concerned that we will not address the AMT 
for 2007 in a timely and fiscally responsible manner. My bill does this 
and would give Congress time to work together in a bipartisan manner to 
find a fiscally responsible permanent solution to the AMT.
  I ask unanimous consent that the full text of this bill be printed in 
the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2826

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. EXTENSION AND INCREASE IN MINIMUM TAX RELIEF TO 
                   INDIVIDUALS.

       (a) In General.--Section 55(d)(1) of the Internal Revenue 
     Code of 1986, as amended by the Tax Increase Prevention and 
     Reconciliation Act of 2005, is amended--
       (1) by striking ``$62,550 in the case of taxable years 
     beginning in 2006'' in subparagraph (A) and inserting 
     ``$66,100 in the case of taxable years beginning in 2007'', 
     and
       (2) by striking ``$42,500 in the case of taxable years 
     beginning in 2006'' in subparagraph (B) and inserting 
     ``$45,900 in the case of taxable years beginning in 2007''.
       (b) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.

     SEC. 2. ALLOWANCE OF NONREFUNDABLE PERSONAL CREDITS AGAINST 
                   REGULAR AND ALTERNATIVE MINIMUM TAX LIABILITY.

       (a) In General.--Paragraph (2) of section 26(a) of the 
     Internal Revenue Code of 1986, as amended by the Tax Increase 
     Prevention and Reconciliation Act of 2005, is amended--
       (1) by striking ``2006'' in the heading thereof and 
     inserting ``2007'', and
       (2) by striking ``or 2006'' and inserting ``2006, or 
     2007''.
       (b) Conforming Provisions.--
       (1) Section 30B(g) of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new paragraph:
       ``(3) Special rule for 2007.--For purposes of any taxable 
     year beginning during 2007, the credit allowed under 
     subsection (a) (after the application of paragraph (1)) shall 
     not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under subpart A and 
     this subpart (other than this section and section 30C).''.
       (2) Section 30C(d) of the Internal Revenue Code of 1986 is 
     amended by adding at the end the following new paragraph:
       ``(3) Special rule for 2007.--For purposes of any taxable 
     year beginning during 2007, the credit allowed under 
     subsection (a) (after the application of paragraph (1)) shall 
     not exceed the excess of--
       ``(A) the sum of the regular tax liability (as defined in 
     section 26(b)) plus the tax imposed by section 55, over
       ``(B) the sum of the credits allowable under subpart A and 
     this subpart (other than this section).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.

     SEC. 3. REPEAL OF EXTENSION OF LOWER RATES FOR CAPITAL GAINS 
                   AND DIVIDENDS.

       The amendment made by section 102 of the Tax Increase 
     Prevention and Reconciliation Act of 2005 is repealed and the 
     Internal Revenue Code of 1986 shall be applied as if such 
     amendment had never been enacted.
                                 ______