'Onerous' tax set for bipartisan 2010 fix

Associated Press
Wednesday, November 10, 2010

Leaders from both parties in Congress vowed Tuesday to spare more than 21 million taxpayers from significant tax increases when they file their returns in the spring by adjusting the alternative minimum tax before the end of the year.

The tax was enacted in 1969 to keep higher-income taxpayers from using deductions and credits to avoid paying any federal income tax. The income limits, however, were not indexed for inflation, so Congress fixes the AMT each year to spare millions of middle-income taxpayers from tax increases that would average about $3,900.

Congress has not made the change for 2010. In a letter to the Internal Revenue Service, Democratic and Republican leaders of the tax-writing congressional committees said they will address the issue after Congress returns next week in a lame-duck session.

Patching it for one year would cost about $70 billion, according to congressional estimates.

"We will work to craft the AMT provision so that, in the aggregate, not one additional taxpayer faces higher taxes in 2010 due to the onerous AMT," said the letter, written by Sen. Max Baucus (D-Mont.), Sen. Charles E. Grassley (R-Iowa), Rep. Sander M. Levin, (D-Mich.), and Rep. Dave Camp (R-Mich.).

The lawmakers were responding to a letter from IRS Commissioner Doug Shulman, who said the later Congress passes such legislation, "the more strain it would have on the IRS's limited resources." On Tuesday, the IRS issued a statement saying that the lawmakers' assurances "will be very helpful."

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