Sen. Reid abandons pay-go rule on AMT

In a sharp change in his position, Senate Majority Leader Harry Reid (D-Nev.) signaled Thursday that he is resigned to waiving pay-go rules to offset a one-year patch to the Alternative Minimum Tax (AMT).

In an attempt to move AMT legislation before Thanksgiving, Reid sent a unanimous consent request to his Senate colleagues that would effectively lead to a one-year AMT repeal with no offset.  

{mosads}However, the move did not appear to reflect an agreement with Senate Republicans on moving the AMT legislation, and one aide dismissed Reid’s request as a political maneuver. “This is a show; it’s not a sincere attempt to legislate and it probably won’t result in passage of an AMT bill,” a Senate GOP aide said.

At press time,  it seemed that Reid’s request had failed. The request contained an amendment, likely to be triggered, that would strip controversial offsets from the House bill. The amendment would provide for a one-year AMT patch with no offset, which would prompt a budget point of order unless the Senate waived pay-go. It would also extend a package of expiring tax provisions for two years with offsets.

The amendment would only be triggered if a cloture vote to approve the AMT bill approved by the House last week fails, which is considered almost certain.

Speaking to reporters on Thursday, Reid appeared to backpedal from his earlier opposition to waiving the budget rules to pass the AMT legislation.

While he insisted that he still preferred to pay for the one-year patch, Reid suggested he was open to other options.

“I think there are number of ways we could do this … We could pay for it, which I prefer. Or we can not pay for it, which I don’t prefer. Or we can pay for it partially — those are the only choices we have,” Reid said.

He conceded that “everything is possible” in trying to get the measure moving, including a clean AMT patch with no offset.

Although the unanimous consent request said that Reid had proceeded “after consultation with the Republican leader,” Democrats did not appear to have struck a deal with Republicans on an AMT bill by press time.

There were discussions between leaders of both parties on Friday about moving the legislation, but the talks did not progress to the point where Republicans were likely to support the unanimous consent request. Minority Leader Mitch McConnell (R-Ky.) told reporters that he hadn’t seen any Democratic proposal on AMT.

According to a GOP Senate tax aide, Democratic members of the Finance Committee unanimously agreed to the proposal described in the amendment triggered by Reid’s maneuver — a one-year AMT patch not offset by tax increases and a two-year fully offset extension of the expiring tax breaks.

However, when they were briefed on the Democratic proposal, staffers for several panel Republicans said their bosses prefer attaching no offsets at all to the legislation, the aide said.

Both Republicans and Democrats are under pressure to pass a one-year AMT patch because not doing so would hit up to 25 million taxpayers with a tax increase next spring. Democrats would like to offset the cost of the patch to adhere with the budget rules approved by Congress earlier this year, but Republicans may be united in opposing tax increases to pay for AMT relief.

Moreover, Senate Democrats are divided on where to raise taxes to pay for the relief, with one House offset that would increase taxes on private equity and hedge fund mangers proving quite controversial in the Senate.

“They’re feeling the heat on the AMT issue. I think this is an eleventh-hour attempt to make some noise, create some news and appear to have at least tried,” the GOP aide said.

Manu Raju contributed to this report.