More than 30 million U.S. household could be slapped by the alternative minimum tax if Congress fails to act after next week's election, observers said.
While Democrats and Republicans agree the election will help determine who has leverage in taxes-and-spending negotiations, congressional aides and tax lobbyists said fixing the AMT could be a a rare spot of agreement no matter who wins, The Hill reported.
"An AMT patch simply has to get done by the beginning of January, and both sides know it," one Democratic aide said.
If lawmakers remain deadlocked on the fate of tax rate cuts enacted during George W. Bush's administration, action on the AMT could be pushed into 2013, which tax experts say could cause chaos at the IRS because of millions of taxpayers filing amended returns.
"Taxpayers begin to file their returns in January," one lobbyist told The Hill. "It would be a tax administration nightmare if Congress waited until 2013 to address the 2012 AMT patch."
Lawmakers first put the minimum tax into place more than 40 years ago in reaction to wealthy people who legally avoided paying taxes. But the AMT is not indexed for inflation, so Congress has had to regularly approve an AMT "patch" to ensure it doesn't hit more middle-class families.
"The AMT patch ensures that Congress must come back and do something," the tax lobbyist said, "but I'm not certain that addressing the patch gives one side or the other any leverage regarding the other major '[fiscal] cliff' issues."
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