WASHINGTON – Leaders from both parties in Congress vowed Tuesday to spare more than 21 million taxpayers from significant tax increases when they file their returns next spring by adjusting the alternative minimum tax before the end of the year.
The tax was first enacted in 1969 to make sure higher-income taxpayers could not use deductions and credits to avoid paying any federal income tax. The income limits, however, were not indexed for inflation, so Congress routinely fixes the AMT each year to spare millions of middle income taxpayers from tax increases that would average about $3,900.
Congress hasn’t made the change for 2010. In a letter to the IRS, Democratic and Republican leaders of the tax-writing congressional committees said they would address the issue after Congress returns next week in a lame-duck session.
The letter is a bipartisan gesture on taxes just days before Congress takes up the much larger issue of extending tax cuts enacted under former President George W. Bush. The Bush tax cuts expire at the end of the year. Congress returns next week, and the tax cuts are among the top issues lawmakers will face.
The alternative minimum tax is a much more routine, but nevertheless important, issue. Patching it for one year would cost about $70 billion, according to congressional estimates.
In 2009, the alternative minimum tax affected individuals making more than $46,700 and married couples making more than $70,950.
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