Fix to alternative minimum tax is passed by House

WASHINGTON - The House took steps yesterday to rein in the alternative minimum tax, carrying out what has become an annual ritual to protect millions of people from getting unexpectedly squeezed by a tax intended only for the very rich.

The House voted, 393-30, to increase the AMT exemption in 2008, saving more than 20 million taxpayers from getting hit with a tax increase averaging about $2,000. The House separately approved, 419-4, tax relief worth $8 billion for disaster victims.

All Philadelphia-area representatives voted for both measures.

The votes came a day after the Senate similarly adjusted the AMT as part of a major tax package that included disaster relief, extension of business and individual tax breaks that have expired or will soon expire, and tax incentives for renewable-energy investment.

The House is preparing a third bill, expected to be debated today, on energy and tax-break extensions.

The disaster and energy bills differ from the Senate counterparts, and it will be a challenge for lawmakers to come up with a compromise.

The AMT was created in 1969 to catch a very small number of rich tax dodgers, but it affects more people every year because the tax is not indexed for inflation.

Without congressional action this year, those hit by the AMT could grow from around four million to about 26 million, the White House said in a statement yesterday urging Congress to move quickly.

Rep. Richard Neal (D., Mass.) of the House Ways and Means Committee said 84 percent of those exposed to the tax have annual incomes of less than $200,000.

The Bush administration applauded the House for not imposing new taxes to offset the cost of the one-year fix. Last year Congress did not clear the AMT bill until late December as a result of a dispute between House Democrats, who wanted the tax relief paid for, and Senate Republicans, who insisted there be no new taxes to match the tax relief. In the end, opponents of new taxes prevailed.

The issue of paying for tax relief also clouds the other aspects of the tax package.

The Senate bill would pay for the $17 billion in renewable-energy tax credits by limiting deductions available to the oil and natural-gas industries. But the bill would only pay for about $25 billion of the $68 billion in business and individual tax breaks.

The House energy-relief and tax-extension bill would be fully paid for.

"While we applaud the Senate for acting yesterday and taking a step toward being fiscally responsible, their bill still falls short of the pay-as-you-go principle that House Democrats have insisted on," House Majority Leader Steny H. Hoyer (D., Md.) said.

Neither chamber would find cuts elsewhere to pay for the $8 billion in disaster relief. The Senate bill targets much of that relief to areas in the Midwest hit by natural disasters this summer and Texas and Louisiana counties damaged by Hurricane Ike. The House bill calls for distributing the aid more evenly.

Senate Majority Leader Harry Reid (D., Nev.) pleaded with the House not to tinker with the Senate-passed package, warning that imposing so-called offsets would kill the bill because of GOP opposition in the Senate.

The energy legislation would extend for eight years investment-tax credits for the solar-power industry and for homeowners who install solar and wind equipment. The extensions of expired tax breaks include the R&D credit that businesses have come to rely on and relief for teachers paying school expenses out of their own pockets.