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Democrats' 130% Tax Increase in Doubt

10:33 AM, Nov 9, 2007 • By BRIAN FAUGHNAN
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We covered yesterday the range of complaints against the plans of House Democrats to raise taxes while paying for a short-term patch in the Alternative Minimum Tax. Today the Hill reports that the House might even delay a vote on the legislation until they are sure they have the votes to pass it:

Centrist Democrats are agonizing over an upcoming vote on legislation backed by House Ways and Means Committee Chairman Charles Rangel (D-N.Y.) that forces them to choose between supporting fiscal discipline or the business community.

At issue is a measure that would more than double the tax rate on private equity and hedge fund managers in order to pay for must-pass legislation shielding millions of middle-class taxpayers from the Alternative Minimum Tax (AMT) for one year.

"There are a lot of undecideds out there, and a lot of them are Blue Dogs," said Rep. Tim Mahoney (D-Fla.), a freshman member of the moderate Blue Dog Coalition who said he would vote no on the legislation. "I'm not sure they have the votes..."

A tight vote is expected, as House Republicans, bolstered by a veto threat President Bush issued on Thursday, are vowing to unite in opposition to the bill. Meanwhile, several senators have signaled their opposition to the tax change, fueling concern that vulnerable House Democrats could be forced to take a tough vote on a doomed measure.

Wavering Democrats could end up holding up the bill. At press time, the vote was still scheduled for Friday, but Democratic leaders acknowledged it could be delayed.

The right move would be to take up a simple AMT fix that does not also raise taxes -- a move which the Democrats blocked in committee yesterday. The president has said he will veto an AMT fix which also raises taxes. There are few who believe such a measure can even pass the Senate.

And of course, to claim that fixing the AMT constitutes a tax cut which must be offset by increases elsewhere is a bogus argument, anyway. Democrats should recognize their mistake and fix the AMT.

Democrats had months to address this problem, and now they are just days away from enacting a de facto tax increase simply because they wasted time.