In a “huge victory” for Republicans and hedge fund managers, the U.S. House of Representatives passed a one-year fix for the alternative minimum tax without levying billions of new taxes on alternative investment managers.
The AMT, designed in the 1960s to prevent the extremely wealthy from dodging taxes, was set to hit as many as 20 million taxpayers this year, including those in the upper middle class. Both parties agreed that something should be done about the AMT, but Democrats wanted to offset the almost $50 billion in lost revenue by raising taxes on so-called “carried interest” and offshore compensation, measures that would have hit hedge fund and other alternative investment managers hard.
But facing the threat of a veto by the White House and a filibuster in the Senate, which refused to consider any tax increase, House Democrats caved, passing their third version of the bill without either tax hike. Its first version included both and the second only the offshore compensation measure.
The president is expected to sign the legislation.
Rep. Eric Cantor (R-Va.), the Republicans’ chief deputy whip, called the concession “a huge victory for us,” adding, “We don’t believe we ought to raise taxes to correct the mistake of AMT.”
Speaking for the Democrats, House Majority Leader Steny Hoyer (D-Md.) said, “There is no disagreement between Republicans and Democrats over protecting the middle class from the AMT. The question is, will we do so responsibly or charge tens of billions of dollars to our grandchildren?”
The answer, apparently, is the latter.