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Look out for 'tax tsunami'




Unless Congress acts soon, thousands of area residents will be subject to a tax increase called the alternative minimum tax.

The original form of the tax was passed in 1969 to prevent rich people from avoiding federal income tax by taking large deductions.

The tax, however, was never indexed for inflation. Over the years, more and more middle class taxpayers have been hit with it.

House Majority Leader Steny Hoyer, D-Maryland, said if Congress does not do something, a "tax tsunami" will hit 20 million Americans.

The Treasury Department estimates that the average increase will be $2,000. U.S. Rep. James McGovern, D-Worcester, said that 13,000 taxpayers in his district paid the tax in 2005. That number would rise to about 83,000 in the district that runs from Worcester, through Attleboro to Fall River.

The House has passed a temporary relief plan. The plan would exempt individuals who make $44,350 and couples earning $66,250 from the tax.

But, there are objections to the House bill in the Senate and President Bush has threatened a veto.

Republicans object because House Democrats want to make up for the loss in revenue by increasing the tax wealthy managers of private equity funds pay.

The White House said the plan merely substitutes one tax for another.

Some conservatives say higher taxes on the managers could slow the economy.

But, McGovern and other House Democrats said their plan is fiscally responsible.

McGovern said Bush and congressional Republicans want to add the cost of the tax relief to the $9 trillion in debt the nation already owes.

He said they want to pay for a tax break today with a tax increase on future generations.

He also questioned Republican contentions that lower taxes pay for themselves by stimulating the economy and generating more revenue. "They would have us believe magic revenue fairies will drop money from the sky along with rainbows and butterflies," he said on the House floor.

With no compromise between the House, Senate and White House in sight, the Internal Revenue Service is warning that it must start printing tax forms this month.

Further delay in settling the alternative minimum tax issue will result in complications and delays in processing tax returns, according to the agency.

 


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kevin wrote on Nov 13, 2007 8:50 AM:

" ""They would have us believe magic revenue fairies will drop money from the sky along with rainbows and butterflies," he said on the House floor." McGovern is a tax addicted dimwit. If I had more money in my paycheck, I would buy things I couldn't afford before,(good for the economy) or put it into savings (like Mrs. Clinton wants) so if I fall on hard times I can use it to avoid foreclosure. It's my money, I earned it, I know best how to spend it. Get out of my pocket! "


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