Permanent AMT
Patch Part of Obama's Proposed FY 2010 Budget
President Obama's proposed fiscal year (FY) 2010 budget
would extend and index for inflation the 2009 alternative
minimum tax (AMT) patch, Office of Management and Budget
(OMB) Director Peter R. Orszag told the House Ways and Means
Committee on March 4. Orszag reiterated the administration's
promise to cut taxes for 95 percent of Americans and to partially
fund health care reform with tax increases on higher income
individuals. Orszag also predicted that the economy would
recover from the current recession by 2011.
AMT Relief
Congress authorized temporary AMT relief for 2009 in the
form of a "patch" in the American Recovery and
Reinvestment Act of 2009 (2009 Recovery Act) (P.L. 111-5).
The 2009 patch provides higher exemption amounts and allows
taxpayers to use most nonrefundable personal credits to offset
AMT liability. The 2009 AMT exemption amounts are $70,950
for married couples filing jointly and surviving spouses
(up from $69,950 in 2008); and $46,700 for single individuals
and heads of households (up from $46,200).
Obama's proposed FY 2010 budget would index for inflation
the 2009 parameters for the AMT as enacted in the 2009
Recovery Act. "The budget includes an AMT fix in all
years," Orszag noted. "Past budgets have generally
included AMT fixes only for the current year." Orszag
further explained that the president's budget proposals
do not assume that the AMT will eventually replace the
regular tax.
Income Taxes
Orszag testified one day after Treasury Secretary Timothy
F. Geithner appeared before the Ways and Means Committee
(TAXDAY, 2009/03/04, C.1). Like Geithner, Orszag emphasized
the administration's pledge to reduce taxes for lower and
middle-income taxpayers. The chief tax cut targeted to working
Americans would be a permanent Making Work Pay Credit, which
is temporary under the 2009 Recovery Act. The Making Work
Pay Credit reaches $400 for eligible single individuals and
$800 for eligible married couples.
Higher income individuals, however, would see their marginal
tax rates increase. Obama has proposed extending the lower
tax rates enacted in 2001 except for the top two rates
of 39.6 and 36 percent. The higher rates are scheduled
to return after 2010 (TAXDAY, 2009/02/27, T.2). The president
has also proposed reinstating the personal exemption phaseout
and limiting itemized deductions for individuals earning
over $200,000 and married couples filing jointly with incomes
above $250,000 (TAXDAY, 2009/02/27, T.2).
Recovery
Responding to GOP criticism about raising taxes during an
economic slowdown, Orszag said that the higher marginal rates
would not apply until after the economy recovers. "The
revenue changes do not take effect until 2011, when the economy
will be back on its feet."
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