AMT relief, investment tax vote delayed
Lawmakers fail to reach agreement, pushing next opportunity for a vote to the end of April.
NEW YORK (CNNMoney.com) – Despite the optimism expressed by lawmakers that they were "very close" to striking a deal Thursday, negotiations on a much delayed tax reconciliation package stalled Thursday night.
As a result, tax conferees from the House and Senate are unlikely to announce any agreement Friday. And even if they do, they won't be able to bring a final bill to the floor for a vote before the two-week Easter recess -- the House decided Thursday night it would begin its recess Friday.
The plan being negotiated included a one-year "patch" for the alternative minimum tax, and a two-year extension of the reduced tax rate on capital gains and dividends, according to CongressDaily.
To keep the cost of the reconciliation bill below the $70 billion ceiling required to protect the bill from filibuster, lawmakers also were negotiating what they could take out of the tax reconciliation package and include under a separate bill, and what revenue-raisers they could add.
Those elements included a number of business tax break extensions such as the research-and-development credit, the state sales tax deduction and other "non-controversial" provisions -- although sources suggested there was disagreement about what was "non-controversial," CongressDaily reports.
Just when that second bill would move also remained a question, the publication noted.
The rancorous debate over just what should be included in the final reconciliation bill has been waged -- without much compromise -- for months.
An earlier House-passed version of the tax reconciliation bill excludes AMT relief (which the body passed under a separate bill), but it includes a two-year extension of the reduced investment tax rates, which expire in 2008. Those cuts would extend the 15 percent rate on long-term capital gains and dividends. For low-income taxpayers, that rate would be 5 percent.
The Senate-passed version of the tax reconciliation bill, meanwhile, does the opposite: it excludes an extension for investment tax cuts and includes temporary increase in AMT income exemption levels for tax year 2006.
The AMT, while originally intended for the wealthy now threatens to ensnare tens of millions of middle class taxpayers unless increases in the AMT income exemption levels are approved.
The AMT, which disallows many of the deductions and credits allowed under the regular tax code, imposes a higher bill on taxpayers than the regular tax code.
Both House Ways and Means Committee Chairman Bill Thomas (R-Calif.) and Senate Finance Committee Chairman Chuck Grassley (R-Iowa) favor extending the investment tax cuts, but Grassley could not secure enough votes to include them in the Senate bill because of opposition from Senator Olympia Snowe (R-Me.), who sits on the Finance Committee.
Democrats, meanwhile, have been unanimous in opposing the investment tax cuts, arguing that they are a boon to the wealthy and would come at a time when the budget includes cuts for domestic programs.