WASHINGTON - In an effort to protect New Jersey's middle class from massive tax increases, U.S. Rep. Bill Pascrell, Jr. (D-NJ-08) led a bi-partisan letter to Speaker John Boehner and Democratic Leader Nancy Pelosi urging them to ensure that any deal to avert drastic spending cuts and tax increases at the end of the year also include a mechanism to raise the Alternative Minimum Tax (AMT) eligibility floor. Failure to act could potentially increase federal taxes for over half of New Jerseyans.
"In New Jersey, we are just starting to rebuild from Hurricane Sandy, the most devastating natural disaster to occur in decades. Yet by not addressing the AMT, we are facing a potentially massive increase in federal taxes that could hamper recovery efforts," said Rep. Pascrell, a member of the tax-writing Ways and Means Committee. "New Jersey already has the highest percentage of AMT payers in the nation. This number could skyrocket if the AMT is not patched, resulting in an average tax increase of $4,000. This would be an unacceptable outcome and I am pleased to join this bipartisan group of colleagues in making it known that any deal to avert the 'fiscal cliff' must include a patch for the AMT."
The Alternative Minimum Tax (AMT) was enacted to ensure that the wealthiest Americans paid their fair share of taxes. However, when the Bush Tax Cuts decreased tax rates, they did not make corresponding changes to the AMT eligibility floor, dramatically increasing the number of middle class families subject to the AMT. In recent years, Congress provided for an increase in the AMT floor to ensure that an additional 21 million middle class households would not have to pay the AMT, specifically through the 2009 American Recovery and Reinvestment Act and again in legislation enacted at the end of 2010 to extend the tax rates for two years.
The full text of the letter is as follows:
December 4, 2012
The Honorable John Boehner
Office of the Speaker
H-232 The Capitol
Washington, D.C. 20515
The Honorable Nancy Pelosi
Office of the Democratic Leader
H-204, US Capitol
Washington, DC 20515
Dear Speaker Boehner and Democratic Leader Pelosi:
As Congress continues to debate the so called 'fiscal cliff,' it is imperative that we make it a priority that taxes intended to apply only to the wealthiest Americans do not inadvertently affect the middle class. The individual Alternative Minimum Tax (AMT) was first enacted in 1982 to ensure that the wealthiest Americans paid their fair share of taxes. Before this tax, many wealthy families were able to take advantage of credits and exemptions to significantly reduce, or even completely eliminate, their federal taxes burden. Unfortunately, when the tax cuts enacted in 2001 and again in 2003, they decreased marginal tax rates, but they did not make corresponding changes to AMT rates. As a result, the AMT eligibility trigger was lowered, resulting in a system where every year, millions of middle class taxpayers, who do not have very high incomes or participate in numerous special tax benefits, could be subject to the AMT.
The state that we represent, New Jersey, is just starting to rebuild from the devastation of Hurricane Sandy. Unfortunately, as families attempt to put back together the pieces of their lives, they are looking at a potentially massive increase in their tax burden when they pay in 2012 due to the AMT. Currently, almost nine percent of New Jersey taxpayers are subject to the AMT, which is the highest percentage in the nation. If the AMT is left unpatched, this number will skyrocket to include possibly half of all households in the state. For example, currently less than half of one percent of New Jersey families earning $75,000 a year are subject to the AMT. But if we fail to patch the eligibility trigger this year, upwards of 87% of families earning this amount would fall under the AMT, costing them an average of $4,000.
Democrats and Republicans have a history of coming together to provide a patch that prevents these higher taxes on middle class families. In 2009, the American Recovery and Reinvestment Act provided for a one year increase in AMT floor to $70,950 for joint filers. At the end of 2010, Congress and President Obama passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, which provided another patch to ensure an additional 21 million middle class households, would not have to pay the AMT.
As the 112th Congress comes to a close and we are faced with massive tax increases and reductions in spending, it is imperative that we find common ground to prevent the AMT tax increase from taking effect on America's middle class. A strong middle class has been the backbone of our economy, yet it has bore the brunt of the financial collapse of 2008. In order to build on our recent economic growth, we ask you to ensure that America's middle class families and the AMT are not forgotten in this debate, and that a patch for the AMT is included in any final deal to avert the so-called “fiscal cliff”.
Signatories of this letter were Congressmen Bill Pascrell, Jr. (D-NJ), Frank LoBiondo (R-NJ), Albio Sires (D-NJ), Jon Runyan (R-NJ), Steven R. Rothman (D-NJ), Frank Pallone Jr. (D-NJ), Donald Payne, Jr. (D-NJ),Robert Andrews (D-NJ), Rush Holt (D-NJ) and Rep. Lenard Lance (R-NJ)