The U.S. House of Representatives voted mostly along party-lines Wednesday to approve H.R. 6275, which would extend relief from the Alternative Minimum Tax (AMT) for another year and offset the costs mostly by closing tax loopholes.
As explained in last week's report from Citizens for Tax Justice, it is only fair that the cost of AMT relief be offset by closing loopholes that benefit the wealthiest Americans. One of these is the much-hated loophole for "carried interest," a form of compensation paid to private equity fund managers in return for investing other people's money. Most of us who earn an income from work are subject to federal income taxes at progressive rates, starting at 10 percent and going up to 35 percent for the very wealthiest. Private equity fund managers are at the top of this wealthy group, but nevertheless pay only 15 percent -- the special low capital gains tax rate -- on their carried interest. Closing this loophole makes up about half of the $61 billion needed to offset the cost of extending AMT relief for a year.
Republican leaders in the Senate will try to block consideration of this bill, arguing that any legislation extending a tax provision that is currently in effect should not be paid for. The absurd implication of this argument is that Congress should not have to pay for tax cuts if they start out as one-year or two-year provisions and are then extended past their original expiration date. It's also a demand for an increase in the budget deficit, which seems to no longer be a concern of conservative lawmakers.