House Democrats introduced a plan Thursday that would repeal the alternative minimum tax and replace it with a new tax on the upper-middle class and the wealthy.
House Ways and Means Chairman Charles B. Rangel, D-N.Y., called the proposal an attempt to “restore equity to the system” by shifting the tax burden away from those with lower incomes.
House Democrats also would lower corporate tax rates, expand the earned income tax credit and increase the child tax credit. Rangel said the plan would provide tax relief for most households earning less than $500,000, or approximately 91 million families.
Republicans said the plan proves that the long-term objective of Democrats is to raise taxes and labeled the AMT proposal “the mother of all tax hikes.”
Democrats acknowledge that many of the components of their tax overhaul plan stand little chance of becoming law because President Bush was sure to veto them.
Rangel said the bulk of his proposal probably would not come up in the House until next year. The Senate is devising a separate tax overhaul plan.
The AMT was established nearly four decades ago to ensure that the wealthy did not escape paying taxes through tax credits.
But because the AMT factors in inflation, it now threatens to ensnare upward of 23 million upper-middle-income families that will have to pay the tax this year unless Congress eliminates it. The House will soon take up a temporary measure that will push off the AMT for those families for one year.
The House will eventually consider a bill that would permanently eliminate the AMT, a step that Democrats said would cost the government $796 billion over 10 years. To help offset the cost, Rangel is proposing a surtax of 4 percent on married couples earning an annual $200,000 or more and 4.6 percent on couples earning $500,000 or more.
“It seemed to us that to be more equitable in terms of providing tax relief, that we should take a look at the disparity that exists between the middle income and those that are more fortunate in income and try to spread the tax relief,” Rangel said.
House Majority Leader John A. Boehner, R-Ohio, called the proposal “the largest tax increase ever proposed on the American people.”
“For the Americans out there who think we areundertaxed, this is a grand slam,” said Rep. Eric Cantor, R-Va.
