Congress grants some relief on alternative minimum tax

WASHINGTON - Congress yesterday approved a plan that will spare millions of middle-class taxpayers from paying higher taxes in the coming months. The White House said President Bush would sign the bill.

The tax reprieve postpones for one year only the alternative minimum tax, a parallel tax system enacted in 1969 to keep very wealthy investors from using deductions and tax shelters to avoid paying income tax altogether. The alternative tax has ensnared a growing number of middle-class Americans in recent years because the 1969 law was not indexed to inflation.

Without the fix by Congress, some 25 million filers would have to pay the tax on their 2007 income, up from 4 million who paid it this year, according to the White House.

The measure would increase slightly the amount of income that is exempt from the alternative tax. For individuals, that means the exempt amount increases from $42,500 in 2006 to $44,350 in 2007. For married couples, the exemption amount climbs from $62,550 to $66,250.

The AMT requires taxpayers - generally those who deduct items like medical expenses, state and local taxes and credits for dependents - to make separate calculations and to pay the one that produces the higher figure.

The vote on the alternative-tax plan came on the final day of the first session of the 110th Congress, which ended with a burst of last-minute legislation, including final adoption by the House of a $555 billion budget package.

Inside that catchall spending bill was $70 billion to fund military operations in Iraq and Afghanistan. The measure combines the war money with money for 14 Cabinet departments.

House Democrats angrily approved the alternative-tax bill after giving in to demands by congressional Republicans and Bush that the tax cut not be offset by raising other taxes.

The Democrats repeatedly tried to get Senate Republicans to back a plan that would have paid for the cut by imposing new taxes, particularly on wealthy hedge-fund managers. But the Republicans refused, leaving Democrats little choice but to break their promise. By not offsetting the cost, the national debt will increase by $50 billion.

Also yesterday:

_ Congress sent an extension of a popular health-insurance program for children to Bush. Lawmakers supported a $35 billion expansion of the State Children's Health Insurance Program. Bush vetoed two bills that would have provided the additional money but is expected to sign this version. The extension through March 2009 was part of legislation that also would give physicians a 0.5 percent rate increase when they treat the elderly and disabled in Medicare.

_ Congress approved legislation that would make it easier to flag prospective gun buyers with documented mental problems.

_ Congress acted to give extra home heating assistance to cash-strapped families. The government's Low Income Home Energy Assistance Program would get roughly $409 million more.

_ Senate Majority Leader Harry Reid, D-Nev., said he would keep Congress in session over the holiday break solely to keep Bush from making recess appointments. It was an apt ending to a bitterly partisan congressional sessions.

"We're going to go into pro forma session so the president can't appoint people that we think objectionable," Reid said as the Senate prepared to wrap up business for the year.

The Senate must confirm major presidential appointments and judicial nominations, a constant source of confrontation between the White House and Senate Democrats.

But when the Senate is off, as it will be for the rest of the month and much of January, the president can make recess appointments that aren't subject to confirmation hearings. *