Thelma Drake on Tax Reform Republican Representative (VA-2)

Voted NO on extending AMT exemptions to avoid hitting middle-income.

1. increase and extend through 2008 the alternative minimum tax (AMT) exemption amounts;
2. extend through 2008 the offset of personal tax credits against AMT tax liabilities;
3. treat net income and loss from an investment services partnership interest as ordinary income and loss;
4. deny major integrated oil companies a tax deduction for income attributable to domestic production of oil or gas.

The AMT sets a minimum tax rate of 26% or 28% on some taxpayers so that they cannot use certain types of deductions to lower their tax. By contrast, the rate for a corporation is 20%. Affected taxpayers are those who have what are known as "tax preference items". These include long-term capital gains, accelerated depreciation, & percentage depletion.

Because the AMT is not indexed to inflation, an increasing number of upper-middle-income taxpayers have been finding themselves subject to this tax. In 2006, an IRS report highlighted the AMT as the single most serious problem with the tax code.

For 2007, the AMT Exemption was not fully phased until [income reaches] $415,000 for joint returns. Within the $150,000 to $415,000 range, AMT liability typically increases as income increases above $150,000.

OnTheIssues.org Explanation: This vote extends the AMT exemption, and hence avoids the AMT affecting more upper-middle-income people. This vote has no permanent effect on the AMT, although voting YES implies that one would support the same permanent AMT change.

Voted NO on paying for AMT relief by closing offshore business loopholes.

Proponents support voting YES because:

Rep. RANGEL: We have the opportunity to provide relief to upward of some 25 million people from being hit by a $50 billion tax increase, which it was never thought could happen to these people. Almost apart from this, we have an opportunity to close a very unfair tax provision, that certainly no one has come to me to defend, which prevents a handful of people from having unlimited funds being shipped overseas under deferred compensation and escaping liability. Nobody, liberal or conservative, believes that these AMT taxpayers should be hit by a tax that we didn't intend. But also, no one has the guts to defend the offshore deferred compensation. So what is the problem?

Opponents recommend voting NO because:

Rep. McCRERY: This is a bill that would patch the AMT, and then increase other taxes for the patch costs. Republicans are for patching the AMT. Where we differ is over the question of whether we need to pay for the patch by raising other taxes. The President's budget includes a 1-year patch on the AMT without a pay-for. That is what the Senate passed by a rather large vote very recently, 88-5. The President has said he won't sign the bill that is before us today. Republicans have argued against applying PAYGO to the AMT patch. In many ways PAYGO has shown itself to be a farce.

Voted YES on retaining reduced taxes on capital gains & dividends.

• Decreasing the number of people that will be required to pay the Alternative Minimum Tax (AMT)
• Allowing for deductions of state and local general sales taxes through 2007 instead of 2006
• Lengthening tax credits for research expenses
• Increasing the age limit for eligibility for food stamp recipients from 25 to 35 years
• Continuing reduced tax rates of 15% and 5% on capital gains and dividends through 2010
• Extending through 2007 the expense allowances for environmental remediation costs (the cost of cleanup of sites where petroleum products have been released or disposed)

Rated 0% by the CTJ, indicating opposition to progressive taxation.

OnTheIssues.org interprets the 2005-2006 CTJ scores as follows:

• 0% - 20%: opposes progressive taxation (approx. 235 members)
• 21% - 79%: mixed record on progressive taxation (approx. 39 members)
• 80%-100%: favors progressive taxation (approx. 190 members)

Citizens for Tax Justice, founded in 1979, is not-for-profit public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation. CTJ's mission is to give ordinary people a greater voice in the development of tax laws. Against the armies of special interest lobbyists for corporations and the wealthy, CTJ fights for:

• Fair taxes for middle and low-income families
• Requiring the wealthy to pay their fair share
• Closing corporate tax loopholes
• Adequately funding important government services
• Reducing the federal debt
• Taxation that minimizes distortion of economic markets