House Works to Make Tax Cuts Permanent

WASHINGTON – The House plans to pass a bill making permanent a broader bottom tax bracket (search) that benefited virtually all wage earners in the next step in a plan to preserve President Bush's tax cuts.

Three of those tax cuts expire at the end of the year: the expanded bottom tax bracket, a reduction in the marriage penalty (search) and an increase in the child tax credit (search).

The House has addressed one of the issues each week, beginning last week with a bill making the tax cuts for married couples permanent. House GOP leaders next week expect to debate the bill that would permanently expand the lowest 10-percent tax bracket. A bill to preserve the bigger child credit will be considered last.

The House voted Wednesday to prevent millions of middle-income families from losing their tax cuts to the alternative minimum tax (search), a levy imposed on wealthy tax dodgers that has been trapping more middle-class taxpayers each year.

None of the bills become law until and unless they are passed by the Senate and signed by the president.

The House voted 333-89 to prevent the alternative minimum tax from imposing $17.8 billion in extra taxes on 9 million more taxpayers next year. This year, about 3 million individuals and families paid the alternative minimum tax.

The bill slows the alternative minimum tax's spread into the middle class by keeping the amount of income exempt from the tax at this year's level, $40,250 for individuals and $58,000 for couples.

"Today's vote provides families relief now while a more fundamental solution is developed to address the AMT problem," said House Ways and Means Committee Chairman Bill Thomas, R-Calif.

Without congressional action, the exemptions will fall back next year to $33,750 for individuals and $45,000 for couples.

The less affluent taxpayers stuck with an alternative minimum tax bill often have a combination of factors that would typically lower taxes but are ignored in the alternative minimum tax system. These include high state taxes, unreimbursed employee expenses, numerous children or dependent parents.

The White House estimated that 9 million more taxpayers would pay the alternative minimum tax next year unless lawmakers act. The Tax Policy Center (search) calculated that as many as 12 million more individuals and families could get hit with the tax if lawmakers extend tax cuts scheduled to expire at the end of the year but do not address the alternative minimum tax.