A Match Made in HeavenAugust 8, 2007 - by Donny Shaw
via Bloomberg News:
>Iowa Senator Charles Grassley said he intends to link his proposal to boost taxes on publicly traded buyout firms to a fix of the alternative minimum tax, a pairing that may make it harder for opponents of the measure to vote against it.
>"This is going to come when we deal with the alternative minimum tax,‘’ Grassley, a Republican, said in an interview in Sidney, Iowa yesterday. He said the bill deals with "issues of equity and fairness.’’
>The strategy would partner legislation to raise taxes on publicly traded partnerships such as Blackstone Group LP to a measure shielding 23 million mostly middle-income households from an AMT increase this year. It’s a tactic that has worked in the past: last year Republicans successfully paired an AMT relief measure to an extension of a capital-gains tax cut that was opposed by many Democrats.
Grassley got the idea to consider the issues in tandem from his House counterpart. Charlie Rangel (D-NY), the chairman of the House Ways and Means Committee, anounced in an interview last week that he would be combining the two tax measures into one bill and moving forward with it in September.
>"That would be a good use for it,‘’ Grassley said of Rangel’s plan. Grassley said he hasn’t decided whether to support the House proposal but agreed that any tax revenue gained from such a measure should be used to protect more middle-class taxpayers from paying the AMT.
>The comments of the two lawmakers suggest that the bills may be considered earlier than expected. Senate Majority Leader Harry Reid, a Nevada Democrat, said in an interview last month that he didn’t expect the Senate to act on any tax-raising legislation until 2008.
These are two unfair and outdated tax policies that are in desperate need of reform. Wealthy hedge fund and private equity managers have been racking in outrageous profits due, in part, to a tax loophole that allows them to have their income taxed at the much-lower capital gains rate. Meanwhile, the middle class has been increasingly subjected to higher taxes due to the encroachment of the Alternative MInimum Tax, a rate designed in 1969 to ensure fair taxation of America’s 155 wealthiest, but that is scheduled to effect about 23 million in 2007 since it is not indexed to inflation.
The Democratic Congress adopted new budgeting rules in January that require them to offset any increased spending or revenue loss with a plan for equal gains elsewhere. Closing the carried interest loophole for fund managers would recover $4 billion to $6 billion annually and could help pay for rolling back the effects of the AMT from the middle class.