Congress Moves Closer To Ending Standoff Over Taxes
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Congress moved closer to ending a standoff on how to protect taxpayers from the alternative minimum tax as two top Democrats said they would no longer link it to a proposed tax increase on private equity executives.
The chairman of the House Ways and Means Committee, Charles Rangel, agreed to drop the tax increase after Senate Republicans refused to include it in a plan to stop an alternative minimum tax increase this year on 23 million American households. The Senate Majority Leader, Harry Reid, made a similar offer earlier yesterday.
Mr. Rangel said Republicans agreed to a tax increase on hedge fund managers.
“We will make adjustments to the bill to address some of the political opposition in the Senate as it relates to bringing equity into the tax code for managers of equity and hedge funds,” Mr. Rangel said. “We are looking to close a loophole where billions of dollars in offshore funds have escaped taxation.”
The concessions suggest lawmakers are close to resolving a month-long stalemate in which Democrats insisted that to curb the alternative minimum tax they must raise the $50 billion in lost revenue. Republicans said they wouldn’t boost other taxes to pay for a levy that was never intended to affect millions of taxpayers.
Mr. Rangel said he would remove a provision that would boost the tax on so-called carried interest, the performance fees that managers of private equity firms, hedge funds and some real estate and oil and gas partnerships earn. In return, Republicans agreed to limits on how much money hedge fund managers can defer offshore tax free, Rangel said in a statement.
Wednesday, Rep. Jim McCrery, the ranking Republican on the Ways and Means Committee, said he sees merit in that Democratic proposal that would effectively raise taxes for managers of offshore hedge funds by almost $24 billion over a decade.
The Senate last night agreed to spare 23 million American households from the alternative minimum tax this year after Republicans forced Democrats to drop plans to balance the cuts with higher taxes on managers of hedge funds and buyout firms.
The Senate voted 88-5 to approve a one-year, stop-gap measure that temporarily indexes the minimum tax for inflation and adds $51 billion to the deficit. Senator Schumer voted with the majority.
