N.Y. Rep. Houghton Introduces Tax Simplification Package

N.Y. Rep. Houghton Introduces Tax Simplification Package
AMT, Tax Code in Need of Reform, But Is Passage Likely in Election Year?

By Jay Dismukes

Continued from the Home Page

The estimated cost of this proposal, which assumes that the current exemption would be extended through 2005, is $263 billion. However, it’s a revenue loss that Houghton’s staff points out is far less than the estimated cost of immediate repeal. The Congressional Budget Office in mid-April announced that, under current law, eliminating the AMT altogether would reduce revenues by nearly $600 billion over the next 10 years.

“We are just trying to say this is maybe a reasonable way to go at it rather than trying to bite off the whole $600 billion or $700 billion in one crack,” said Hugh Hatcher, a Houghton staff member.

Unlike the AMT bill, which does not attempt to make up the difference in cost, Houghton’s other proposals to simplify individual taxes are considered revenue neutral. They concern head-of-household filing status, points on refinancing a home mortgage, the taxation of minor children, education tax credits, and the definition of a qualifying child. The other three bills would affect small businesses.

The AMT Dilemma

According to estimates released by the House of Representatives’ Joint Committee on Taxation, AMT taxpayers under the present law increase from 3.3 million in 2004 to 26.2 million in 2010. That figure slides back to 18 million in 2013.

Given the increasing number of middle-income Americans who will be subject to a tax which was originally intended for very wealthy individuals who had no income tax liability, and which is widely viewed as discriminatory against high-tax state residents and large families that can’t take deductions and exemptions under AMT rules, AMT reform has been on accountants’ and lawmakers’ radars for years. The problem with fixing it, though, as the CBO’s figures illustrate, is the substantial revenue loss, especially at a time when the nation’s budget deficit is at a record high.

Last year, a New York State Society of CPAs’ task force led by Alan E. Weiner issued a report to Congress on tax simplification, which included a provision on the AMT. This report made its way to Houghton, who chairs the Oversight Subcommittee of the House Ways and Means Committee, and is said to have had an “influence” on the Congressman’s nine bills, according to Payson Peabody, an Oversight Subcommittee staff member. Peabody contacted the Society just after the bills were introduced.

In its report, the Society task force proposes overhauling the AMT, calling for an end to the addbacks for taxes, miscellaneous deductions and personal exemptions, updated rates and modification of the exemption amount. Though Houghton’s staff and the subcommittee considered restructuring the AMT, Hatcher said that they concluded that this approach would still subject a large number of people to the tax and would be nearly as expensive as repealing it.

“We just think that times have changed so much since it was enacted, that the purpose of it has disappeared,” said Hatcher, noting tax loopholes that have been closed since the mid-80s.

Though Weiner appreciates the subcommittee’s acknowledgement of the tax simplification report, he is disheartened that Houghton’s bills only address two of the task force’s seven proposals (the AMT and the definition of a child). The former NYSSCPA president is also skeptical of anything getting passed, especially after Houghton steps down in November.

“I look at it and I’ve seen so many of these bills and they just don’t get passed,” Weiner said. “Taxes have become very political…unless you’ve got a strong politician to back what is proposed, it’s just not going anywhere.”

Weiner is not the only one with doubts about the bills’ chances for passage.

“The likelihood of picking these up doesn’t look good, because it’s an election year,” Hatcher said. “I don’t see overall AMT reform this year because it is so expensive.”

Still, Hatcher believes someone else will rally around the simplification package and is hopeful that individuals will back at least one or two items, if not the whole proposal. According to Peabody, it was for this very reason that Houghton decided to issue the bills separately, rather than as part of a big consolidated bill such as the tax simplification proposal he introduced last year in the form of H.R. 22.

“We separated out certain provisions from H.R. 22 that we thought would attract more support on their own,” Peabody said. “So these bills, except for the AMT, represent low-cost, high-impact simplification proposals. The AMT bill is in a separate category, totally different than what was in H.R. 22.”

The H.R. 22 bill seeks an increase in the AMT exemption amount, an inflation adjustment, and a repeal of the limit on deductions on state and local taxes.

In conjunction with Houghton’s nine bills, he also introduced a resolution that would amend House rules to prevent any tax measure from being considered unless it contained a simplification title.

To read the bills Houghton has sponsored (H.R. 4131 through H.R. 4139), go to www.house.gov and click on “Find a Bill or Law” on the right-hand side of the page.