Daily Tax Update - March 22, 2007

HOUSE BUDGET COMMITTEE APPROVES FISCAL 2008 BUDGET RESOLUTION:  Early today, the House Budget Committee adopted a $2.96 trillion fiscal year 2008 budget resolution by a 22-17 vote.  The budget plan would allow some of President Bush's temporary tax cuts--the child tax credit, "marriage penalty" relief, the 10-percent individual income tax bracket, and the deduction for state and local sales taxes--to be extended beyond their scheduled 2010 expiration, but only if they are paid for.  The plan would also provide a "reserve fund" for future AMT relief, a tax credit for school construction bonds, and increase the unified credit for estate and gift taxes.

  • Democrats defeated a number of Republican amendments, including an amendment to add a "no tax increase commitment" to the resolution, and amendments to extend other Bush tax cuts, namely the current marginal rates, the capital gains and dividends rates, the child tax credit, the marriage penalty tax fix, state and local sales tax deduction, and estate tax relief.
  • Ranking minority member Paul Ryan (R-WI) called the budget outline the largest tax increase in American history.  Chairman John M. Spratt Jr. (D-SC) defended against the claim, describing the proposal as "neutral" on the issue of taxes and noting that if revenues come in as projected by the Bush budget, then that increased revenue would give more "latitude" in a debate over extension in 2010, when tax cuts are set to expire.

WAYS & MEANS SUBCOMMITTEE HOLDS AMT HEARING:  Today, the House Ways & Means Select Revenue Measures Subcommittee held a hearing on the Alternative Minimum Tax (AMT).  Among the witnesses was the American Institute of Certified Public Accountants, which called for the repeal of the AMT, but in the absence of repeal offered a number of alternative solutions, including (i) increasing the AMT brackets and exemption amounts and indexing them for inflation, (ii) eliminating the standard deduction and personal and dependency exemptions, miscellaneous itemized deductions, medical expenses, and/or state and local income taxes as an AMT adjustment, and (iii) exempting taxpayers with regular tax AGIs under $100,000 from the AMT.

  • In announcing the hearing, Subcommittee Chairman Richard Neal (D-MA) said, "This AMT was originally designed to catch millionaires who were avoiding their tax liability through the use of excessive deductions.  Today, that system has gone seriously awry.  This year a family of four earning $66,000 could be hit by the AMT.  This was not meant to be.  The AMT is a bipartisan problem and we must work together to find a bipartisan solution.” 

TAX BILL INTRODUCED MARCH 21ST:

H.R. 1562 : To amend the Internal Revenue Code of 1986 to extend and expand certain rules with respect to housing in the GO Zones.
Sponsor: Rep Rangel, Charles B. [NY-15] (introduced 3/19/2007) Cosponsors (2)
Committees: House Ways and Means
Latest Major Action: 3/21/2007 House committee/subcommittee actions. Status: Ordered to be Reported (Amended) by Voice Vote.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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