WASHINGTON — Seeking to preempt a planned tax overhaul by Rep. Charles Rangel of Harlem, House Republicans are pushing their own bill to scrap the costly alternative minimum tax.
A proposal announced yesterday by a coalition of fiscal conservatives would replace the AMT with a second, voluntary system aimed at simplifying the tax code. The bill could emerge as a chief competitor to legislation that Mr. Rangel, the Democratic chairman of the House Ways and Means Committee, is expected to release in the next few weeks.
Members of both parties on Capitol Hill have vowed to fix the minimum tax, which began nearly four decades ago as a way to make sure the 155 wealthiest Americans paid their fair share in taxes but is set to affect 23 million taxpayers next year because it has not been adjusted for inflation.
The chief difference between the Republican bill and what Mr. Rangel is likely to propose is that Democrats have said the estimated $841 billion cost of repealing the AMT will have to be paid for with tax increases in other areas, probably on top earners.
"The big debate over AMT is who's going to get $841 billion," the chairman of the Republican Study Committee, Rep. Jeb Hensarling of Texas, said yesterday at a press conference to announce the bill. "Will it remain with the working families across America, or will it go to fuel more government bureaucracies and bigger government in Washington, D.C.?"
He added: "We don't know the details of what Chairman Rangel may produce, but we have no doubt that when the dust settles, there will be an $841 billion tax increase on American families. That is wrong."
While Republicans said their proposal would be revenue-neutral under the current budget, it does not replace the money that is projected to come in over the next 10 years from the AMT. They have argued that since the minimum tax was never meant to affect so many people, taxpayers should not have to foot the bill.
The ranking member of the House Budget Committee, Rep. Paul Ryan, said a repeal of the AMT should force the government to curtail spending. "We are putting the taxpayer first," he said. "We are saying this is the taxpayer's dollars and we are not going to raise these taxes, and the government has to get back in line."
Mr. Rangel declined to comment on the proposal through a spokesman.
Under the Republican bill, titled the Taxpayer Choice Act, Americans would have the option of switching to a simplified income tax structure of two tiers from the current system of six tiers. Individuals earning up to $50,000 and couples earning below $100,000 would be subject to a 10% rate, and people earning above those levels would pay 25%. The standard deduction and personal exemption would be retained, but most other deductions and credits would be eliminated.
Taxpayers would have 10 years to choose which system to file under, and with few exceptions, they could only switch back once.
The proposal drew praise from a key conservative advocacy group, Americans for Tax Reform. "I really like it," the group's director of tax policy, Ryan Ellis, said, calling it "a very, very simplified income tax."