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NTU Supports AMT Rate Reduction
July 18, 2007
The Honorable Arlen Specter
Dear Senator Specter:
On behalf of the 362,000 members of the National Taxpayers Union (NTU), I write to offer our endorsement of S. 734, the AMT Rate Reduction Act of 2007. Your bill would roll back the rates for the Alternative Minimum Tax back to where they were before President Clinton's tax hike package was enacted. While our members support a complete repeal of the AMT (as called for in S. 55), we view S. 734 as a good step toward easing the fiscal wallop delivered to taxpayers who have been - or will soon be - hit by the AMT.
An estimated 4 million taxpayers paid the Alternative Minimum Tax this past filing season, even though the tax was originally passed in 1969 to make 21 millionaires with no tax liability "pay up." More and more people are being ensnared by the tax because Congress failed to index the AMT's family income exemption rates for inflation when President Clinton signed a rate hike into law in 1993. If Congress does nothing this year, an estimated 23 million taxpayers will have to pay the AMT in 2008. It's a long way to go from targeting 21 millionaires to capturing 23 million taxpayers, and as NTU Associate Policy Analyst Matthew Bailey noted in a policy paper on the subject, "the result is ... a huge deadweight loss to both the taxpayer and the U.S. economy."
Specifically, your bill would reduce the AMT rate from 26 percent (for taxable income up to $175,000) and 28 percent (for taxable income over $175,000) to a flat rate of 24 percent for all taxpayers obligated to pay the tax (this was the rate before the 1993 Clinton tax hike). The Wall Street Journal estimates that 10 million taxpayers would be spared the ravages of the AMT if your bill becomes law, and that's an outcome worth fighting for.
Any roll call votes on the AMT Rate Reduction Act of 2007 will be significantly weighted in NTU's annual Rating of Congress. We look forward to working with you to pare back the damaging effects of the 1993 AMT hike.