House passes AMT patch

House Democrats approved legislation on Friday to extend a host of popular tax breaks and shield middle-class families from the Alternative Minimum Tax (AMT) for one year, voting to pay for it with a controversial provision raising taxes on the private equity and hedge fund industries.
    
The move sets up a confrontation over pay-as-you-go budget rules with the Senate, where Democrats appear to lack the votes to offset the cost of a one-year AMT patch.

{mosads}“This legislation helps restore tax fairness and — once again — demonstrates that this Democratic majority is committed to fiscal responsibility,” Majority Leader Steny Hoyer (D-Md.) said on the House floor prior to the vote.

The $78 billion tax package passed 216-193, largely along partisan lines. No Republican supported the bill, while eight Democrats sided with GOP members to oppose it. They were Reps. Jim Cooper (Tenn.), Melissa Bean (Ill.), Tim Mahoney (Fla.), Nick Lampson (Texas), John Barrow (Ga.), Jim Matheson (Utah), Gene Taylor (La.) and Harry Mitchell (Ariz.).

The tax package is considered must-pass legislation. If Congress does not act, the popular tax breaks will expire and up to 23 million families could get hit with the AMT, a tax originally intended to ensure that the wealthy paid income taxes. But because it was never indexed to inflation, it will gradually swallow the middle class if it is not fixed.

Senate Republicans, including the ranking member of the Finance Committee, Sen. Chuck Grassley (Iowa), believe that AMT relief should not be offset with tax increases. Grassley argues that Congress never counted on the revenues from the tax, which could reach $1 trillion over the next decade.

Senate Democrats, meanwhile, are divided on the House measure that would raise taxes on the private equity industry.