Senate Finance Approves Stimulus Package with AMT Patch

The Senate Finance Committee on January 27 approved its portion of an $825 billion economic stimulus bill, the American Recovery and Reinvestment Bill of 2009, and potentially boosted the total cost to nearly $900 billion after agreeing to include a one-year patch for the alternative minimum tax (AMT). The $69.8 billion price tag of the fix is not offset and its inclusion could possibly serve to mollify Republicans who have complained that the package contains too much spending and not enough tax cuts. The final vote was 14 to 9.

Committee Chairman Max Baucus, D-Mont., has been under intense pressure to include more Republican proposals, and he has done so, tacking on several modifications before presenting the bill to the committee. Such changes include loosening net operating loss carryback requirements, extending the deferred business tax debt repayment period from four years to eight years and expanding credits for broadband development and hybrid electric plug-ins. Bank acquisitions lost a tax break as Baucus restricted the utilization of Code Sec. 382 rules for transactions occurring after January 16, 2009. The provision raises approximately $7 billion in revenue.

In his opening statement, Baucus had urged members not to delay in moving the bill in a timely fashion. "Congress needs to act quickly and in a unified fashion to address the economic woes in this country," he said.

Committee members initially offered over 216 amendments to the Chairman's Mark, but the panel eventually considered less than 30, approving only the AMT patch. Sen. Robert Menendez, D-N.J., had earlier filed a different version of an AMT amendment, but modified his amendment to mirror an amendment offered by ranking member Charles E. Grassley, R-Iowa. The economic stimulus bill passed on January 22 by the House Ways and Means Committee did not address the AMT (TAXDAY, 2009/01/23, C.1).

The stimulus package in its present form faces an uncertain future though, as President Obama on January 27 met with Republicans in both chambers to hear their proposals and hopefully craft a more bipartisan bill. Stopping short of making any promises, Obama called the meetings "constructive" and acknowledged that GOP members had "legitimate philosophical differences." He assured them that the bill was still a work in progress, despite House plans to hold a vote on its version on January 28. "The key right now is to make sure that we keep politics to a minimum," said Obama.

Obama Tax Cuts

According to White House Press Secretary Robert Gibbs, the president has not refused to compromise with GOP lawmakers on tax cuts, and his economic advisors will evaluate any proposals advanced by them. When asked about the AMT patch proposed by Grassley, the White House spokesman maintained that the administration's Making Work Pay tax credit would serve as a greater stimulus to the economy.

The president ran on a tax policy that lower-income workers whose wages have stagnated or declined are the ones who are most likely to spend any additional earnings they receive from tax breaks, Gibbs said at a press briefing on January 27. He noted that Obama supports the AMT patch, but believes it should be taken up separately from the economic recovery package, since it is directed at upper-middle-income taxpayers. Gibbs said the most important thing about the House vote on the economic package and Senate action is "keeping the process moving." He maintained that Obama is open to making some changes in the bill and believes "we are on track" to finish a stimulus bill that will garner bipartisan support by the Presidents Day recess.

Separately, Office of Management and Budget Director Peter Orszag sent a letter to Congress outlining the major principles of the president's economic plan. Among the measures to maintain fiscal discipline in the future, Orszag said any proposals in the economic package to make temporary tax cuts permanent will be paid for, and further details will be included in the president's forthcoming budget request to Congress in February.