[Congressional Record Volume 153, Number 137 (Monday, September 17, 2007)]
[House]
[Pages H10411-H10412]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1945
DEMOCRATS SEEK TO USE AMT AS WEDGE
The SPEAKER pro tempore. Under a previous order of the House, the
gentleman from Indiana (Mr. Burton) is recognized for 5 minutes.
Mr. BURTON of Indiana. Mr. Speaker, nobody wants tax increases, and a
tax increase right now would be detrimental to the economy of the
United States. In fact, the Treasury Secretary thinks it would be
disastrous. It would put the economy into a tailspin.
Chairman Rangel of the Ways and Means Committee recently tried to use
as a wedge the AMT, the alternative minimum tax, as a way to create a
new system down the road that would raise billions and billions of
dollars in new taxes across this country. As a matter of fact, they
would raise the top tax rate on capital gains to 36 percent. On people
making over $200,000 a year, it would raise their tax rate to 36
percent; and these tax increases would be absolutely devastating to the
people of this country and to the economy of this country.
Chairman Rangel in 1996 had an opportunity to vote against the
alternative minimum tax, but he voted for it. And now he is saying he
is against it, and he is using it as a wedge to get other taxes
increased, which over the long term, over the next 10 years, will
result in billions and billions of dollars of new tax increases for the
people of this country.
Tonight, I would like to enter into the Record some statements made
by Grover Norquist and Bob Novak in a column he wrote, so that the
people of this country will be aware of what is coming about.
Explaining all of these tax changes is very difficult in 5 minutes. It
is very difficult for the people of this country to understand. But I
want the people of this country to know that the Democrats are planning
to use the AMT as a wedge so they can raise taxes across the board and
hit everybody. And it is going to hurt the economy of this country and
hurt every American taxpayer.
All I would like to say is that the American people need to know
this. I hope everybody reads this. Everybody wants to do away with the
alternative minimum tax on our side of the aisle, but we want to do it
cleanly in one fell swoop. At least we ought to reduce it over a period
of time so it goes away, but they are using it as a wedge so they can
raise taxes in the next 10 years. And it will be very detrimental to
the American economy.
[From the New York Sun, Sept. 7, 2007.]
Rangel's Priority Is Repealing the AMT
(By Russell Berman)
Washington.--Amid mounting opposition to a proposed tax
hike on the managers of hedge funds and private equity firms,
the chairman of the House Ways and Means Committee, Rep.
Charles Rangel, is making clear that his first priority is
fixing the widely reviled alternative minimum tax.
Congressional Democrats have zeroed in on private equity
taxation in their search for new revenue sources to pay for
expanded health care and other domestic spending priorities.
Mr. Rangel convened a marathon hearing yesterday to delve
into an array of tax ``fairness'' issues.
[[Page H10412]]
``It has not been the goal of this committee to target any
tax provisions other than the AMT,'' the Harlem Democrat said
at the outset of the hearing, which featured 20 witnesses.
``However, it is fair to say that since the AMT is such an
expensive revenue loser--because the revenue it brings in was
never expected--that naturally we have to look at the entire
tax code.''
Created in 1969 to ensure that the wealthiest Americans
assumed at least a minimum tax burden, the AMT, because it is
not adjusted for inflation, increasingly is affecting middle-
income taxpayers and has drawn criticism from both sides of
the political aisle. More than 23 million Americans could be
subject to it this year.
``It's the perfect storm of bad tax policy,'' the director
of the Urban Institute's Tax Policy Center, Leonard Burman,
told lawmakers yesterday, adding that the AMT is ``hideously
complex.''
Yet the cost of repealing the AMT is estimated at more than
$800 billion over the next decade, leading to the proposed
tax hike on private equity. A bill sponsored by Mr. Rangel
and Rep. Sander Levin of Michigan would more than double the
tax rate that hedge fund and private equity managers would
pay on their investment gains, known as ``carried interest.''
Carried interest is currently subject to the capital gains
rate of 15 percent, but the proposed change would treat it as
income subject to the marginal rate of as much as 35 percent.
Citing annual incomes for managers as high as $500 million,
one Democrat, Rep. Artur Davis of Alabama, made no secret of
his view that the party should look for revenue from
``individuals who are making massive amounts of money,''
saying they ``frankly won't really miss the difference.''
Economists and tax lawyers testifying yesterday debated the
likely impact of the tax increase on the financial sector and
the economy, as Republicans on the committee pressed them on
whether it would drive investment overseas or whether
managers would shift the burden to investors by charging
higher rates.
A Republican congressman from Virginia, Eric Cantor, said
Democrats were on a ``hunt'' for new revenues and that the
private equity proposal ``targets one of the most innovative
sectors of the economy.''
In a prepared opening statement, the ranking Republican on
the committee, Rep. James McCrery of Louisiana, warned that
the proposal ``will move us backward while the rest of the
world moves forward to improve their competitive position.''
He added: ``I seriously doubt this proposal will become law
during the 110th Congress.''
The debate over the taxation of hedge funds and private
equity has raged on Capitol Hill amid heightened scrutiny of
the $2 trillion industry and of the vast profits the firms
have taken in.
The effort to raise the tax rate on carried interest faces
opposition from the private equity industry, and more
recently from the U.S. Chamber of Commerce and a coalition of
minority and women business groups.
As he did at a Senate committee hearing in July, Bruce
Rosenblum, the chairman of the industry's lobbying group, the
Private Equity Council, warned that a tax hike on carried
interest could discourage investment and hurt American
competitiveness.
The proposal has divided New York's two senators. Following
her top Democratic rivals in the presidential campaign,
Senator Clinton has come out in favor of the tax hike.
Senator Schumer, the third-ranking Democrat in the Senate,
has signaled his opposition, citing the potential harm to
Wall Street and New York's competitiveness worldwide. He also
has said targeting partnerships only in the financial sector
would be unfair, suggesting that a similar increase be
considered for partnerships in the oil and gas industries.
Mayor Bloomberg, meanwhile, has mostly stayed silent on the
issue.
The Senate Finance Committee held its third hearing on the
issue of carried interest yesterday, focusing on pensions.
____
[September 10, 2007]
Confronting His Monster
(By Grover Norquist)
The House Ways and Means Committee, chaired by Rep. Charles
Rangel, held a hearing this month supposedly about
simplifying the tax code for middle income families. What it
really was about was a monster Mr. Rangel created, fed,
defended, and now has turned on its master: the Alternative
Minimum Tax. This tax was changed around a bit throughout the
1970s, and found its modem form in 1982. That year, Mr.
Rangel voted for an AMT rate of 20 percent, which still only
affected several thousand taxpayers.
In 1986, he voted to raise the AMT rate to 21 percent, and
several thousand more taxpayers were affected. Mr. Rangel did
not vote for an increase in the top rate to 24 percent that
followed.
In 1999, Mr. Rangel voted against repealing the AMT beast
and slaying it forever. Had that bill become law, the AMT
would have been permanently repealed on December 31, 2007--
this year. Instead, Mr. Rangel is forced to deal with a
monster of his own creation. The monster has gotten hungry.
According to official estimates, failure to restrain the AMT
will lead to 27 million taxpayers having to pay this tax. A
tax that would be dead, gone and buried this year if not for
President Clinton and Mr. Rangel.
The irony is almost poetic. The typical AMT taxpayer lives
in a state like Mr. Rangel's New York, Nancy Pelosi's
California, and Robert Menendez's New Jersey. They have a
jumbo mortgage, sky-high state income taxes, a couple of
kids, and a six-figure income. For the most part, these are
the inner-suburb-urbanite, center-left voters who supported
the AMT authors in the first place. It is unlikely that there
is a thousand dollar contributor who is not paying the AMT.
Now there is considerable pressure on Mr. Rangel to help
these constituents. So, he has been supporting a plan to
eliminate the AMT--and raise taxes on everyone else to pay
for it.
He has to find a way to ``pay'' for AMT repeal because of
the return of PAYGO rules with the new Democrat majority. You
can't cut any taxes, according to these bizarre rubrics,
without raising other ones.
If Mr. Rangel can't find enough tax increases to kill the
AMT, he can try a ``patch'' that will keep the AMT-paying
households at ``only'' several million taxpayers. This
requires fewer tax increases, all of which will be permanent,
in order to pay for only one year of this AMT ``patch.''
There is a better way. Senator Grassley, the ranking member
on the tax-writing Senate Finance Committee, has a good way
of describing the AMT: It's a mistake. It is not doing what
it was intended to do. Instead, thanks to proper care and
feeding by zookeepers, the AMT beast is threatening to
ensnare tens of millions of American families.
To paraphrase Mr. Grassley, ``you don't `fix' a mistake, or
`patch' a mistake--you correct the mistake.'' In this case,
that means a clean kill of the AMT. Revenue losses shouldn't
be counted, since the AMT mistake is yielding a windfall of
income never intended by policymakers.
There is legislation to do just that in both chambers of
Congress. This legislation is not sponsored by the likes of
Mr. Rangel, who ostensibly wants to help AMT taxpayers, but
by conservative Republicans who want to kill the AMT because
it's the right thing to do. Phil English of Pennsylvania, and
has 54 cosponsors. In the Senate, it's sponsored by none
other than Mr. Grassley as S. 55. Quite simply, it would
fully and totally repeal the AMT immediately.
Some prefer a more incremental approach, which is also
fine. Forty percent of the AMT problem would be eliminated if
Congress were to simply repeal the Clinton AMT that Mr.
Rangel supported. That is, Congress could simply undo the AMT
tax hike that was part of the 1993 Clinton tax increase.
Doing that would take the top AMT tax rate from the current
28 percent to a lower 24 percent.
The ``AMT Rate Reduction Act of 2007'' does just that and
reduces the current top rate of 28 percent to 24 percent.
It's sponsored by Rep. Ed Royce of California and Eric Cantor
of Virginia in the House as H.R. 2253 and has 20 cosponsors.
In the Senate, it's sponsored by Senator Specter as S. 734.
In politics, you have to wear bifocals--long and short
sight. Repealing the Clinton AMT may be the best we can do
this year, so supporters of full AMT repeal should also be
supporters of Clinton AMT repeal.
In any event, taxpayers should see through Mr. Rangel's
bluster. He's not riding in on a white horse, saving the
middle class from the AMT. Rather, he's desperately running
through the countryside, trying to get everyone to forget
that the Frankenstein monster was one he helped create.
____________________