Congressman Peter Welch finds himself in an awkward position concerning legislation that provides tax relief to thousands of middle class Vermont families.
Welch strongly supports the bill but a new version of the proposal doesn’t include a way to pay for it, so Welch says he’s voting against it.
VPRs Bob Kinzel reports:
(Kinzel) When Congress passed the Alternative Minimum Tax back in 1969, the goal of the bill was to make certain that individuals with substantial incomes paid a minimum tax on both their earned and unearned income.
At the time, some of these individuals were able to significantly reduce their tax burden by claiming a large number of deductions.
The income levels for the AMT were never adjusted for inflation, and as a result, more and more middle income people have fallen under the scope of the law particularly if they’ve sold property or stock during the tax year.
The U.S. House in recent months has twice passed legislation boosting income levels for the AMT so that fewer middle income people would be affected by it. In Vermont, it’s estimated that about 42 thousand people would pay lower taxes under this bill.
The price tag for the legislation is roughly 50 billion dollars and the House financed the plan by eliminating tax loopholes for managers of Wall Street hedge funds.
The Senate, at the urging of President Bush, passed a similar bill but didn’t include a funding source for the legislation.
And that’s the source of Congressman Welch’s dilemma – he supports the bill but can’t vote for it without a funding source:
(Welch) "We simply can’t it’s inexcusable it’s not the Vermont way to be taking the easy way out we’ve passed and I’ve supported relief for middle income taxpayers twice and each time I’ve supported ways to pay for it."
(Kinzel) Welch wants to pay for the legislation by requiring hedge fund managers to pay income taxes on the fees they receive from customers – right now a lower capital gains tax rate is imposed on these fees:
(Welch) "So basically the President’s approach which the Senate has passed is going to add to the debt and ask our kids and grandchildren to pay for the cost of the AMT rather than simply do something that would have folks making 100s of millions of dollars pay a fair share."
(Kinzel) Backers of the legislation want the President to sign the bill before the end of the month so that it can be in place for the 2007 tax year.
For VPR News I’m Bob Kinzel in Montpelier.