By Jay Heflin - 07/06/10 02:17 PM EDT
Congressional tax writers are looking to extend for a single year the current “patch” on the alternative minimum tax that protects middle-class taxpayers from paying the levy, sources told The Hill on Tuesday.
Lawmakers could extend the patch for two years and under pay-as-you-go rules would not have to pay for its cost. But failing to account for the lost revenue could potentially add hundreds of billions of dollars to the federal deficit.
Without the extension of the AMT patch into 2010, 20 percent of all taxpayers — 40 percent of married couples — will owe the tax in 2010 and pay roughly $90 billion in total taxes, according to the Congressional Budget Office.
The AMT patch would become more expensive in 2011 because of the way the tax is structured. The CBO predicts next year’s tax receipts will total $102 billion, assuming Congress does not extend the middle-class tax breaks passed under President Bush.
If Congress fails to approve a patch this year, approximately two-thirds of taxpayers with taxable incomes between $50,000 and $100,000 will pay the AMT — even though the original intent of the tax was to ensure that the wealthy paid their fair share.
Overall, if lawmakers don’t act, 27 million taxpayers will pay an average of $3,900 in AMT this year, according to the CBO.
Speaker Nancy Pelosi (D-Calif.) has yet to support a one-year patch on the tax, sources say. Lawmakers hope to have her on board before the August break.