[Congressional Record (Bound Edition), Volume 153 (2007), Part 9]
[Senate]
[Pages 12985-12987]
[From the U.S. Government Publishing Office, www.gpo.gov]




                        ALTERNATIVE MINIMUM TAX

  Mr. GRASSLEY. Mr. President, earlier this week, I spoke to my 
colleagues on fleshing out some of the options that may be circulating 
among the current Democratic majority in the other body, meaning the 
House of Representatives, for resolving the crescendo of the 
alternative minimum tax crisis that faces us right now in May of 2007, 
and for all the months before--and if we do not do something, all the 
months for the rest of this year, in which 23 million taxpayers who do 
not pay the alternative minimum tax, will be hit by it. These are 23 
million people who were never intended to pay the alternative minimum 
tax because they are not considered the superwealthy.
  As I said earlier this week, I do not like what I am hearing about 
what is going on in the other body, what they may put on the table in 
terms of paying for the alternative minimum tax, and the solution for 
that problem that is a fact of tax law right now.
  However, I want to make perfectly clear a point on which I agree with 
the other party and the other body. I completely agree that dealing 
with the AMT is a priority issue and that Congress needs to address it.
  The alternative minimum tax is an absolutely maddening tax that has 
insidiously crept into the homes of more and more families each year. I 
have spoken on this floor about its repeal--about its repeal--because, 
No. 1, it is hitting people it was not intended to hit, and also there 
are thousands it was intended to hit who have found ways out of paying 
the alternative minimum tax. So then you get into the ridiculous 
situation of people paying it who are not superrich, and you have 
superrich people it was intended to hit in 1969, when it was first put 
in place, who have found ways around it. So if it ``ain't'' working, 
then it is obviously broken, and you need to fix it.
  The numbers of families paying the alternative minimum tax will rise 
from 4 million families, last year, to 23 million families in 2007--
unless we take legislative action.
  Chairman Baucus, my Democratic leader in our committee, and I 
introduced legislation on the first day of the 110th Congress to repeal 
the individual alternative minimum tax beginning in the 2007 tax year. 
But, of course, it does not appear that the Democratic leadership is 
eager to take up that legislation.
  In each of the past 6 years, Congress has, in fact, passed 
legislation which at least for a temporary period of time successfully 
kept more people from paying the alternative minimum tax by increasing 
the amount of income that is exempt from the alternative minimum tax. 
In other words, by increasing the exempt amount, additional people were 
not hit by the alternative minimum tax.
  These temporary exemptions that have happened over the last 6 years 
have prevented the alternative minimum tax from harming more and more 
middle-class Americans. Most recently, Congress acted to prevent 
millions of taxpayers from receiving a surprise on their 2006 tax 
returns by including an extension of this temporary AMT exemption 
increase in what is called the Tax Increase Prevention and 
Reconciliation Act of 2005.
  In that 2005 bill, the exemption for married couples filing jointly 
was increased from $58,000 to $62,550 for the 2006 tax year.
  This week marks the 1-year anniversary of the enactment of that bill 
in 2005--well, actually, it was not signed by the President until 2006. 
Nearly 20 million American families who were exempt from the AMT 
because of the temporary exemption increase in 2006 knew at this time 
last year Congress was moving to not tax many more millions of people 
by the alternative minimum tax in last year's tax earnings season.
  This year, those families have no such assurance because the 
Democratic leadership--now in the majority as a result of the last 
election--in this Congress does not appear to be moving any legislation 
to address the alternative minimum tax.
  Some of you may wonder why this is a pressing issue. Maybe you take 
the view that you need not address this because the AMT is such a 
stealth tax

[[Page 12986]]

that millions of Americans who are going to owe AMT for 2007 have not 
even thought of that issue yet. It is something for which you might get 
the rude awakening after the first of next year as you prepare your 
income tax, and all of a sudden--boom--23 million more Americans are 
hit by this tax. So you do not worry about it during this 12 months. 
But do not play the American people for a fool.
  I can understand why the taxpayers may not be thinking about it 
because for the past 6 years, as a second point, the Congress has 
addressed the issue on a timely basis, and the taxpayers did not miss a 
beat. When the Republicans were in the majority, American families 
could count on Congress to make sure this AMT issue was taken care of.
  Now, it is nearing the summertime under Democratic leadership, and 
there is no clear path to a credible temporary or permanent solution. 
We need to address this now for the folks who do not even know what is 
about to hit them in the year 2007. And some were hit in April already. 
I will explain that. That is why it cannot wait. It is here and now for 
some taxpayers.
  I hope, however, my colleagues have heard, then, from some of these 
constituents who are being hit by it. That happened through the 
estimated tax payment in April 2007, when at least some Americans were 
hit with paying this when they prepared that estimated tax payment you 
do four times a year. Those families have made that first payment and 
are painfully aware, then, of Congress's failure to act on the AMT this 
year, whereas 12 months ago we had already acted.
  Until recently, I had hoped the Senate was unified in not wanting to 
collect the AMT for this year or any year in the future. On March 23--
almost 2 months ago--I offered an amendment to the fiscal year 2008 
Senate budget resolution that would have required Congress to stop 
spending amounts that are scheduled to come into Federal coffers 
through the alternative minimum tax. The legitimacy of that amendment 
was based on the proposition that the budget, which we just adopted 
today, the conference report--assumes these 23 million Americans are 
going to pay this tax they were never intended to pay. So get it out of 
the budget if you are taxing people who are not superrich and who were 
not supposed to pay it in the first place, and particularly when a few 
thousand of the superrich have even found ways to get legally around 
not paying a tax that was intended for them to pay. My amendment was 
not adopted because I think if my amendment had been adopted, we would 
have some honesty in the budgeting process. However, not a single one 
of my colleagues on the other side of the aisle voted in its favor.
  On the House side, we hear the Ways and Means Committee is doing a 
lot of talking about the alternative minimum tax, but they have yet to 
move to action. It has been reported that House Democrats plan to 
exempt everyone who earns less than $250,000 from the AMT. Now, that is 
not eliminating it like I want to do, but it sounds to me as if that is 
a step in the right direction.
  However, the new Democratic majority has pledged to offset any tax 
cuts. Some staggering proposals are bouncing around to offset a 
$250,000 exemption from the AMT. I outlined two of them on Monday when 
I spoke to my colleagues. One option would raise the top marginal 
income tax rate to over 46 percent--a rate that we have not seen since 
it was 50 percent between 1963 and 1981. Now, that 46 percent is up 
from the 35-percent marginal tax rate under current law.
  There is another option the House may be considering, and that is to 
raise the top alternative minimum tax rate to 37 percent, up from 28 
percent under current law.
  I have to believe that anyone would shy away from actually proposing 
a double-digit tax rate increase. So let's take a minute to explore 
another approach we have heard floated for alternative minimum tax 
relief--paying for it by raising marginal tax rates on the top three 
income tax brackets.
  Except for that 35 percent bracket, you are definitely talking about 
raising the tax on middle-income people to pay for or to offset the 
alternative minimum tax, now hitting those same middle-income people 
who were not intended to pay it in the first place.
  Raising the top three income tax brackets--I do not know why Congress 
would want to raise taxes on top income tax brackets, let alone on the 
top three brackets. However, if that idea is getting serious attention, 
then we need to look behind the lipstick and examine the pig. So I have 
a chart in the Chamber to show you how many taxpayers would be 
impacted.
  In 2004, there were nearly 6 million individuals and families in the 
top three tax brackets. If you go through an analysis to show what the 
grim scenario of raising taxes on the top three income tax brackets 
might look like, it is not a very good picture.
  There is another chart which lays out the numbers on an option 
prepared by the Tax Policy Center. I do not want you to think I am 
highlighting a partisan Republican analysis. The Tax Policy Center has 
undertaken an extensive analysis of multiple options on the alternative 
minimum tax. I think it would be more than fair to say they are a group 
that my colleagues on the other side of the aisle often look to for 
reasoned analysis of policy issues. In fact, I believe they recently 
testified at the Ways and Means Committee in the other body on 
precisely this point. They outlined many options in their study, and 
this is just one that I want to walk through for illustration purposes.
  This option--they call it the ``broad reform and increase top income 
tax rates'' option--would reduce the number of AMT taxpayers by almost 
90 percent in the year 2007. So that would mean you would have 300,000 
people paying the alternative minimum tax instead of the 23 million 
middle-income taxpayers who are being hit with it right now, as I 
speak. Only 100,000 taxpayers with incomes below $200,000 would owe the 
alternative minimum tax under their plan.
  Again, I think this is a step in the right direction, until you take 
a look at their plan to offset it, to offset this AMT relief. The plan 
would raise income tax rates on 6 million families in the top three 
income tax brackets. This chart shows then where the ordinary tax rates 
would go as a result of this suggestion.
  For taxpayers in the current 28 percent bracket, and that includes 
single taxpayers earning $74,000 and married families earning $124,000, 
their tax rates would increase from 28 percent to 35.4 percent. That is 
higher than the current tax rate for the wealthiest Americans under 
present law. The current 33-percent bracket would go up to 41 percent, 
and the top tax bracket would go from the current 35 percent up to 45 
percent. So again we would be facing another option that requires a 
double-digit, marginal tax rate increase.
  So while I applaud the efforts of many to analyze potential AMT 
solutions, I urge my colleagues to be aware of anyone bearing marginal 
tax rate increases in their basket of goodies to solve this horrendous 
problem of 23 million middle-income taxpayers paying the alternative 
minimum tax. It was never supposed to be paid by middle-income people 
because it was a tax reserved for the superwealthy in 1969, numbering 
about 155 people. So how do you get from 155 people to 23 million 
people, if the tax policies are working the way they were intended to 
work?
  Now, there is another alternative, and that is something Congress 
isn't apt to do and something in the budget that was adopted shows that 
the majority is not inclined to do. But Congress should control 
spending and stop budgeting with revenues flowing in on the ledger from 
the AMT instead of increasing taxes to solve the problem. AMT tax 
relief that relies on increases in ordinary tax rates to move the ball 
turns out to be no tax relief at all. I think we have the issue of 
whether we want to keep this economy going, and I speak of Chairman 
Greenspan. Maybe he was beyond his chairmanship when he said that the 
tax policies of 2001 and 2003 were responsible for the 7.8 million 
jobs, the growth in the economy that we have now, and bringing in 
three-

[[Page 12987]]

quarters of a trillion dollars of revenue that nobody anticipated would 
be coming in when we gave those tax reductions. So why would you want 
to raise the marginal tax rates when Chairman Greenspan says the lower 
rates are responsible for the revitalization of the economy and kill 
the goose that laid the golden egg? It doesn't make sense.
  Those are the ideas that are floating around this Hill to solve the 
problem of 23 million Americans being hit by a tax they were never 
intended to pay, counting revenue coming in from people who were never 
intended to pay it to show that the budget is balanced. Intellectually 
dishonest? Yes. Fraudulent? Yes. It is something that is unexplainable. 
Yet we are stuck with it and it ought to end. It is not going to end 
until we repeal a tax that shouldn't be on the books in the first place 
because it isn't hitting all of the superwealthy the way it was 
intended to, and it is beginning to hit 23 million middle-income 
people, and in the process, when you start raising taxes like that on 
that group of people, pretty soon you are going to ruin the middle 
class. The middle class is the stability of any society in the world, 
but particularly in the last 150 years, it has been the stability of 
America's society.
  I yield the floor, and I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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