Tax News

CCH (cch.taxgroup.com) reports:

House Ways and Means Committee Chairman Charles B. Rangel, D-N.Y., told reporters on October 17 to expect the introduction of two separate tax bills during the week of October 22. One measure, which he called a "stop-gap" bill, would cost about $80 billion and extend a group of popular business and individual tax breaks known as the tax extenders. It would also provide a one-year patch to prevent the alternative minimum tax (AMT) from affecting about 23 million American families in 2008. That bill will reach the House floor before adjournment in mid-November, he said.
The second piece of legislation to expect, Rangel promised, would be the "mother of all reform" bills that would include provisions to totally eliminate the AMT at a cost of roughly $800 billion. This second tax bill, which Rangel expects to see on the House floor sometime in 2008, would also cut taxes for about 90 million Americans, lower corporate tax rates and close many tax loopholes that businesses currently enjoy.
Rangel said that he has met with House Speaker Nancy Pelosi, D-Calif., as well as members of his committee, and determined that the larger bill should not be rushed to the House floor. Instead, Rangel plans to visit business and consumer groups in 2008 to drum up support for the measure.
Both bills will be revenue-neutral, according to Rangel, who downplayed any suggestion that lawmakers should waive the House's pay-as-you-go rules that require spending and tax cut bills to be fully offset. He said that changing the tax code to require that hedge fund operators be taxed at ordinary income rates, rather than capital gains rates, is just one possibility out of many that lawmakers are considering to raise revenues.
Rangel also suggested that cutting corporate tax rates and closing tax loopholes might be seen as a tax increase by businesses since, under the current tax system, those loopholes result in many corporations avoiding all taxes. Rangel said that he and Treasury Secretary Henry M. Paulson, Jr., are "close to reading from the same page" on corporate-tax changes.
Republican Response
Rangel's proposals come amid calls from House and Senate GOP lawmakers to take quick action on the AMT. In a letter to Paulson, Senate Finance Committee ranking member Charles E. Grassley, R-Iowa, and House Ways and Means Committee ranking member Jim McCrery, R-La., asked for a detailed analysis of the impact on taxpayers of the Democratic-led Congress' failure to extend the AMT in 2007 (TAXDAY, 2007/10/17, C.2).
McCrery told CCH that Rangel's plan to eliminate the AMT by raising taxes on wealthier Americans is unlikely to succeed. He predicted that Rangel will end up passing a one- or two-year AMT patch that does not solve the problem. The AMT should be eliminated as part of an overall plan for comprehensive reform, he said.
Fellow Ways and Means member Paul Ryan, R-Wis., recently introduced the Taxpayer Choice Bill of 2007 (HR 3818), which would eliminate the AMT and impose a new simplified tax system to replace the current income tax system (TAXDAY, 2007/10/11, C.3). Rangel noted Ryan's plan, saying that he had encouraged GOP lawmakers to come forward with AMT proposals. However, Rangel did not express support for the Ryan bill.
By Stephen K. Cooper, CCH News Staff