AMT Rate Reduction Act of 2007

Mr. Speaker, nobody wants tax increases, and a tax increase right now would be detrimental to the economy of the United States. In fact, the Treasury Secretary thinks it would be disastrous. It would put the economy into a tailspin.

Chairman Rangel of the Ways and Means Committee recently tried to use as a wedge the AMT, the alternative minimum tax, as a way to create a new system down the road that would raise billions and billions of dollars in new taxes across this country. As a matter of fact, they would raise the top tax rate on capital gains to 36 percent. On people making over $200,000 a year, it would raise their tax rate to 36 percent; and these tax increases would be absolutely devastating to the people of this country and to the economy of this country.

Chairman Rangel in 1996 had an opportunity to vote against the alternative minimum tax, but he voted for it. And now he is saying he is against it, and he is using it as a wedge to get other taxes increased, which over the long term, over the next 10 years, will result in billions and billions of dollars of new tax increases for the people of this country.

Tonight, I would like to enter into the Record some statements made by Grover Norquist and Bob Novak in a column he wrote, so that the people of this country will be aware of what is coming about. Explaining all of these tax changes is very difficult in 5 minutes. It is very difficult for the people of this country to understand. But I want the people of this country to know that the Democrats are planning to use the AMT as a wedge so they can raise taxes across the board and hit everybody. And it is going to hurt the economy of this country and hurt every American taxpayer.

All I would like to say is that the American people need to know this. I hope everybody reads this. Everybody wants to do away with the alternative minimum tax on our side of the aisle, but we want to do it cleanly in one fell swoop. At least we ought to reduce it over a period of time so it goes away, but they are using it as a wedge so they can raise taxes in the next 10 years. And it will be very detrimental to the American economy.

[From the New York Sun, Sept. 7, 2007.]

Rangel's Priority Is Repealing the AMT

(By Russell Berman)

Washington.--Amid mounting opposition to a proposed tax

hike on the managers of hedge funds and private equity firms,

the chairman of the House Ways and Means Committee, Rep.

Charles Rangel, is making clear that his first priority is

fixing the widely reviled alternative minimum tax.

Congressional Democrats have zeroed in on private equity

taxation in their search for new revenue sources to pay for

expanded health care and other domestic spending priorities.

Mr. Rangel convened a marathon hearing yesterday to delve

into an array of tax ``fairness'' issues.

``It has not been the goal of this committee to target any

tax provisions other than the AMT,'' the Harlem Democrat said

at the outset of the hearing, which featured 20 witnesses.

``However, it is fair to say that since the AMT is such an

expensive revenue loser--because the revenue it brings in was

never expected--that naturally we have to look at the entire

tax code.''

Created in 1969 to ensure that the wealthiest Americans

assumed at least a minimum tax burden, the AMT, because it is

not adjusted for inflation, increasingly is affecting middle-

income taxpayers and has drawn criticism from both sides of

the political aisle. More than 23 million Americans could be

subject to it this year.

``It's the perfect storm of bad tax policy,'' the director

of the Urban Institute's Tax Policy Center, Leonard Burman,

told lawmakers yesterday, adding that the AMT is ``hideously

complex.''

Yet the cost of repealing the AMT is estimated at more than

$800 billion over the next decade, leading to the proposed

tax hike on private equity. A bill sponsored by Mr. Rangel

and Rep. Sander Levin of Michigan would more than double the

tax rate that hedge fund and private equity managers would

pay on their investment gains, known as ``carried interest.''

Carried interest is currently subject to the capital gains

rate of 15 percent, but the proposed change would treat it as

income subject to the marginal rate of as much as 35 percent.

Citing annual incomes for managers as high as $500 million,

one Democrat, Rep. Artur Davis of Alabama, made no secret of

his view that the party should look for revenue from

``individuals who are making massive amounts of money,''

saying they ``frankly won't really miss the difference.''

Economists and tax lawyers testifying yesterday debated the

likely impact of the tax increase on the financial sector and

the economy, as Republicans on the committee pressed them on

whether it would drive investment overseas or whether

managers would shift the burden to investors by charging

higher rates.

A Republican congressman from Virginia, Eric Cantor, said

Democrats were on a ``hunt'' for new revenues and that the

private equity proposal ``targets one of the most innovative

sectors of the economy.''

In a prepared opening statement, the ranking Republican on

the committee, Rep. James McCrery of Louisiana, warned that

the proposal ``will move us backward while the rest of the

world moves forward to improve their competitive position.''

He added: ``I seriously doubt this proposal will become law

during the 110th Congress.''

The debate over the taxation of hedge funds and private

equity has raged on Capitol Hill amid heightened scrutiny of

the $2 trillion industry and of the vast profits the firms

have taken in.

The effort to raise the tax rate on carried interest faces

opposition from the private equity industry, and more

recently from the U.S. Chamber of Commerce and a coalition of

minority and women business groups.

As he did at a Senate committee hearing in July, Bruce

Rosenblum, the chairman of the industry's lobbying group, the

Private Equity Council, warned that a tax hike on carried

interest could discourage investment and hurt American

competitiveness.

The proposal has divided New York's two senators. Following

her top Democratic rivals in the presidential campaign,

Senator Clinton has come out in favor of the tax hike.

Senator Schumer, the third-ranking Democrat in the Senate,

has signaled his opposition, citing the potential harm to

Wall Street and New York's competitiveness worldwide. He also

has said targeting partnerships only in the financial sector

would be unfair, suggesting that a similar increase be

considered for partnerships in the oil and gas industries.

Mayor Bloomberg, meanwhile, has mostly stayed silent on the

issue.

The Senate Finance Committee held its third hearing on the

issue of carried interest yesterday, focusing on pensions.