Lawmakers Shudder at Tax Increase To Fix AMT

Sen. Charles B. Rangel says he eventually wants to draft a bill that would permanently eliminate the alternative minimum tax. (By Caleb Jones -- Associated Press)

"There aren't very many good games in town here," said Sen. Ron Wyden (D-Ore.), also a Finance Committee member, referring to offsetting tax increases. "There are less than perfect choices."

In the House, Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) said he was inclined to lower his own sights when it came to tax legislation this year.

He said he would continue to draft what he has called "the mother of all reforms," a tax bill that would permanently eliminate the AMT and provide other benefits to as many as 90 million Americans. But he said that he was "leaning" toward not pushing that bill to a vote until next year.

He said he would concentrate this year instead on much smaller, stopgap legislation that would prevent the AMT from boosting taxes on middle-income families in the short run. The measure would also temporarily extend a series of soon-to-expire tax breaks, including one for corporate research and development.

Rangel said he intended to pay for the tax reductions in such a stopgap measure, which could total as much as $65 billion, but he declined to say how. He also indicated that finding those tax increases would be a hard slog.

"We'll pay for it with great difficulty," he said. "It's going to be politically painful."

In the Senate, tax-writers agreed that tax increases needed to pay for its own, similar stopgap bill would be tough to find.

Sen. John Kerry (D-Mass.) said after the Finance Committee meeting, "The effort is to pay for as much as you can pay for."

But Sen. Trent Lott (R-Miss.) said that those tax increases are "going to be pretty hard to get." Asked if the AMT change would be paid for in the end, he said, "Probably not."

President Bush has said he would veto tax increases as part of his stepped-up effort to keep both taxes and spending down.

Almost as soon as they won control of Congress last year, Democratic leaders began pledging to make ending the alternative minimum tax a centerpiece of the budget debate this year. They argued that the levy threatened to unfairly increase tax bills for millions of middle-class families by the end of the decade.

The complex tax was designed in the 1960s to prevent the super-rich from using deductions, credits and other shelters to avoid paying the Internal Revenue Service. But because of rising incomes, the tax is expected to expand to more than 30 million taxpayers in 2010 from 3.8 million mostly well-off households last year.