Democrats Seek to Lead the Way in Tax Overhaul

April 9, 2007
Democrats Seek to Lead the Way in Tax Overhaul

Republicans, including President Bush, agree that the alternative minimum tax is out of control and ought to be frozen if not eliminated entirely. But so far Congress and Mr. Bush have only prevented its expansion with a series of one-year fixes. The House Democrats, by contrast, hope to force the issue of a permanent overhaul of the tax, despite the potentially huge cost.

Between now and the end of May, House Democratic leaders hope to draft a permanent overhaul of the tax that would effectively exclude anyone who earns less than about $200,000 a year — about 97 percent of taxpayers.

But that plan would leave a $1 trillion hole in the federal budget over the next decade, which Democrats would have to replace with revenues from other places or with spending cuts, under new "pay as you go" budget rules. Just postponing the expansion of the tax for one more year would reduce revenues by about $50 billion, according to Congressional budget projections.