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Senate panel takes aim at 'stealth tax' (Donna Smith, May 22, 2005, Reuters)

It is called the "stealth tax" because most U.S. taxpayers are unaware of it, but in a few years, millions of people will pay the so-called alternative minimum tax that only the rich were supposed to pay.

The alternative minimum tax, or AMT, was enacted in 1969 amid reports that 155 taxpayers making more than $200,000, a tidy sum at the time, paid no taxes at all because of deductions and other income tax exemptions.

But what started as a tax to ensure that the wealthiest Americans did not escape paying federal taxes soon will hit more middle-class earners. This year, about 3 million people will pay the AMT and that will grow to 35 million by 2010 unless Congress acts.

A Senate Finance subcommittee opens hearings on Monday on the AMT in preparation for an expected tax reform push by President Bush. A White House commission charged with recommending ways to make the tax code simpler and fairer is expected to publish a report by the end of July.

Finance Committee Chairman Charles Grassley, an Iowa Republican, and others on the panel are not waiting. Grassley and Sen. Max Baucus of Montana, the top Democrat on the panel, along with Arizona Republican Sen. Jon Kyl and Oregon Democrat Ron Wyden plan to introduce legislation this week calling for repeal of the AMT.

The bill's sponsors say the tax was never intended to cover so many taxpayers or be a major source of revenue.

The need for Democrats to fix the AMT virtually guarantees George Bush a major tax reform package.

Posted by Orrin Judd at May 22, 2005 2:31 PM