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Congress Gives Taxpayers Reprieve

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By DAVID M. HERSZENHORN, The New York Times

Published: December 20, 2007

WASHINGTON - Congress on Wednesday gave final approval to a plan that will spare millions of middle-class taxpayers from paying higher taxes in the coming months. The White House welcomed the development and 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 prevent very wealthy investors from using deductions and tax shelters to avoid paying income tax. The alternative tax snared a growing number of middle-class Americans in recent years because the law wasn't 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, the White House said.

The Bush administration took a swipe at Congress for spending months arguing over whether and how to pay the cost of the AMT patch, saying late action by lawmakers might delay tax refunds for up to 38 million filers.

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 that taxpayers - usually those who deduct items such as medical expenses, state and local taxes and credits for dependents - to make separate calculations and to pay the one that produces the higher figure.

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