Neal says Alternative Minimum Tax Fix a Plus in Fiscal Cliff Legislation
U.S. Rep. Richard E. Neal, D-Springfield, is hailing an agreement reached as part of the fiscal cliff talks in Washington which provided a permanent fix for an oppressive tax burden some middle-class families faced.
The Alternative Minimum Tax was effectively neutralized as a "stealth" tax provision to dread for about 28 million middle-income Americans, including one million in Massachusetts, Neal said. The change indexed the qualifying amounts for families and single tax filers for inflation, ending the need for Congress to annually "patch" the legislation by changing the figures.
"I have battled for years to have this abolished," said Neal, a member of the House Ways and Means Committee. He added, "On that, I am declaring victory."
In a speech on the House floor following approval of the change, Neal said "The minimum tax was never indexed for inflation, which caused millions of middle-class Americans to become subject to the tax even though they didn’t make a lot of money."
The AMT, which in its earliest form was enacted in 1969, seeks to ensure that wealthy taxpayers pay a minimum tax even when they take tax deductions that would have reduced their payment to zero.
The income figures and other factors that key the minimum tax weren’t, however, automatically adjusted for inflation -- meaning that with inflation millions of middle-class taxpayers would have become ensnared unless Congress annually changed the qualifying figures.
Neal said it was conceivable that a family of four with an income around $45,000 could have been hit with an extra level of taxation. With the indexing feature added during the recent fiscal cliff negotiations, the problem has been solved, he said, adding, "This is clearly one of the better aspects of the deal."
"I had talked to President Bush, lobbied [Treasury Secretary Tim] Geithner, lobbied the vice president [Joe Biden] on this. I am very pleased," he said of the years-long effort.
As for the talks themselves, Neal said, "This was not an argument on the perfect; it was an argument over what was possible."
He said it is imperative that efforts to reach new budget agreements begin before the next possible federal government crisis, this time over raising the federal debt limit, arrives.
The sequestration agreement on steep automatic budget cuts, which is designed to take effect unless modified by Congress and the president, he said, "should not be an option; it is too dramatic."
Fundamental tax reform is needed, Neal said. And he said the priority for Congress and the administration "should be on getting unemployment down."
Achieving an unemployment rate of 4.5 to 5 percent, he said, would "take care of a third of the [federal] deficit" through increased tax revenue and lower social services costs. Those figures have been the average in post-World War II era economic recoveries.
"It’s pretty frustrating" watching the cliff-hanging budget deals being negotiated as a member of the minority party in the Republican-controlled House of Representatives, Neal said.
But he added, "Their caucus split while ours stayed together," leading to acceptance of an agreement previously passed overwhelmingly in the Senate.
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