LAST-MINUTE BILL SPARES 20 MILLION
TAXPAYERS FROM AMT

More than 20 million taxpayers were spared the effects of the Alternative Minimum Tax under a bill Congress approved just hours before it was set to adjourn for the year.

The bill, a one-year fix, now goes to President Bush, who says he will sign it.

House Democrats tried unsuccessfully for months to find ways to offset the expected $50 billion in lost revenue. Those measures, however, were strongly opposed by Congressional Republicans and Bush, and no such provisions were included in the final bill.

Had Congress not acted, about 23 million more taxpayers would have been subject to the AMT, up from 3 million who paid it this year.

The bill increases slightly the amount of income exempted from the AMT. For individuals, the exempt amount increases from $42,500 in 2006 to $44,350 in 2007, while the exemption for married couples rises from $62,550 to $66,250.  

The AMT was originally designed in 1969 after it was found that a few wealthy families were able to use legal tax breaks to avoid paying taxes altogether. The original law did not index for inflation, so the number of middle-income people subjected to the tax increased dramatically over time.

Tax-free bond investors watched developments closely since interest earned on bonds known as “private activity bonds” is subject to the AMT.

12/20/2007