AMT Relief Passes House, but Faces Hurdle in Senate

The House yesterday approved a plan to protect more than 20 million families from an expensive levy called the alternative minimum tax while raising taxes on hedge fund managers and oil companies. But the measure has little hope of Senate passage, Senate leaders said.

On a largely party-line vote of 233 to 189, the House voted to prevent the AMT from expanding to ensnare millions of middle-class taxpayers next April, which would add thousands of dollars to their tax bills.

To replace the lost revenue -- more than $61.5 billion -- the House agreed to more than double the tax rate on income from investment services partnerships such as hedge funds, to deny oil and gas companies a lucrative deduction for domestic production and to require credit card companies to report their transactions with retailers to the Internal Revenue Service, among other provisions.

Although the Senate also supports reining in the AMT, that chamber rejected a similar House plan in December to pay for the measure. Senate Finance Committee Chairman Max Baucus (D-Mont.) said that little has changed in the Senate in the past six months, so "why go through the motions?" He recently offered a proposal to patch the AMT that would increase the deficit rather than raise taxes.

Republicans in both chambers and the White House argue that there is no need to "pay for" an extension of existing tax policy. "The administration does not believe that the appropriate way to protect the 26 million Americans from higher 2008 AMT liability -- including 22 million that would be newly exposed to the AMT -- is to impose a tax increase on other taxpayers," the White House said this week in a veto threat issued against the bill.

But Democrats took control of Congress last year on a promise to rein in the deficit, in part by covering the cost of any changes in tax policy. Democrats have applied that policy inconsistently, but House leaders, under pressure from fiscal conservatives known as the Blue Dogs, recently have grown more adamant about following it.

"We made a commitment in this Congress to be better stewards of our country's fiscal and economic health," said Rep. Mike Ross (D-Ark.), the Blue Dogs' chief spokesman. "The Blue Dogs are putting forth good-faith efforts to honor that commitment; it is high time that the Republicans in the Senate did the same."