Thursday, December 13, 2007

AMT: It's all about who is to blame

The House passed another fully "paid for" AMT patch, Tax Notes ($) reports. "Paid for" in the sense that the projected 10-year increase in revenue from changes to, for example, the taxation of nonqualified deferred compensation plans paid to offshore hedge fund managers (among other similar esoterica) will be equal to the one-year "cost" of not imposing an AMT on the middle class that we never intended to impose on the middle class in the first place. Does anyone think that those deferred compensation plans won't be revised within weeks to avoid paying any such new tax?

The White House has threatened a veto, but more importantly the bill seems unlikely to gain much traction in the Senate, given the 88-5 expression last week that a simpler plan of one-year relief is the better way to go. That bill was also nearly blocked by Senate Republicans, until Max Baucus issued a blistering press release on the consequences of their failure to take yes for an answer. The press release made crystal that Republicans would get—and deserve—all of the blame for the increased AMT if they didn't drop their intransigence. So they did.

Where will the blame fall now? House Democrats are trying to deflect the blame back to Republicans with assertions that they are being "fiscally responsible" by incorporating a tax increase into their plan.

By the way, everyone seems to agree that the extenders part of the bill is dead for the rest of this year.

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