Press Conference with Sen. Grassley (R-IA) and Rep. Jim McCrery (R-LA) on the Alternative Minimum Tax (AMT)
Interview
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SEN. GRASSLEY: Congressman McCrery and I thank you very much for coming. Now, we have received a response and it's going to be passed out to you - a response from the Secretary of the Treasury to our joint letter about the impact of the filing season if Congress doesn't pass or pass soon an AMT fix. The secretary in this letter makes it very clear that we have to pass an AMT patch, otherwise we're going to see 21 million additional taxpayers subject to the AMT.
We cannot be hitting these families, many making less than $100,000 dollars a year with an average new tax increase of $2,000 per family. As you can see from these charts, either one of them, that one's got a couple messages on it; this one here you can see that nearly half of all taxpayers making less than $100,000 dollars are hit by the AMT. But passing the AMT bill is not enough. We need to do it quickly and we need to do it now, otherwise we're looking at a filing fiasco come April the 15th.
If we don't act early November, the Treasury Department says 25 million taxpayers, not just families that are hit by the AMT, but other families as well could face delays in processing their returns and paying of their refunds by Treasury. The Treasury Department says that $75 billion dollars in tax refunds could be delayed for many weeks, and this would include many low-income and middle-income families as well as those that receive the earned income tax credit. To the both of us, this is very unacceptable.
In addition, not only will refunds be delayed, failure to act will devastate taxpayer service at the IRS. There are a lot of struggling families out there that depend on their tax refund to make critical payments: to buy a car, to get a new job, to pay off the bill collector, to help meet the cost of children's education, etcetera. These families can't afford, and they shouldn't have to, wait weeks on end for the IRS to get them their tax refund. It's their money. It's their refund. They have a right to expect it be sent to them right away.
But this isn't going to be the case unless the Democratic leadership pulls up its socks and makes passing an AMT bill and extenders a priority, very soon, meaning in the next couple of weeks. I'm sorry that we have to resort to an AMT patch instead of doing away with it. In 2001 the Senate passed a six year AMT patch and agreed in conference with the House to a four year patch. More recently, I've sponsored legislation and voted for complete repeal of the AMT. In addition, I've consistently pressed for longer AMT relief packages. We shouldn't have to go through this song and dance every year.
My concern about tax administration and the filing season are not new. I've been beating the drum last year, calling for us to pass much sooner, an extenders bill. Now it's even worse, later in the year. The failure to pass an AMT patch and not to pass it in a timely manner will significantly affect millions of more taxpayers than even that extender issue did last year.
The Democratic Congressional leadership needs to step up to the plate, do so now. They have a responsibility, being in the majority. The letter from Secretary Paulson, that I've referred to, makes it clear that further delays past early November will cause incredible problems for the taxpayers. Delays of AMT patch into December will then be in his words, "a filing fiasco." It should be processed on the Senate floor in regular order and not jammed into some appropriation bill or continuing resolution.
Democratic leaders need to give the Finance Committee designated floor time to allow consideration of this important issue. Summing up, today's letter from Treasury makes it clear that these new facts about the hot potato that we're dealing with is just a lot hotter this year. Congress needs to take action now, otherwise one of the most frustrating days of America, which happens to be April 15th, is going to be a whole lot worse.
Congressman McCrery, glad to work with you on this issue.
REP. MCCRERY: Thank you, Senator Grassley. Let me just underscore some of the points that Senator Grassley made. First of all, for the last several years, as you know, the Congressional leadership has passed a patch to make sure that the AMT doesn't do something like this, doesn't encroach upon the middle class.
The latest that we have passed a patch to the AMT in the past few years is June. Now, we're in mid-October, almost November. Senator Grassley said if we don't do something very quickly, according to the letter from the Secretary of the Treasury, we will not only push several million -- tens of millions of people into a several week delay on getting their refunds, which will amount to about a $75 billion dollar interest free loan that individuals will be making to the federal government, but the processing software for the IRS has to be updated. That takes 12 to 13 weeks. And so that's going to push back everybody's tax return.
So we are looking at not only staving off the encroachment of the AMT, we are looking at a very serious situation in which millions and millions of taxpayers will have their refunds delayed significantly if Congress doesn't take action immediately, really. And there's no reason for this to be delayed. Now I suppose you're thinking well, the reason the new majority hasn't come out with their AMT relief or AMT repeal or whatever it is they want to do, is because of the PAYGO rules. Well, I would submit to you that this patch should be done with no PAYFOR.
If we do a PAYFOR, if we pay for the AMT patch we will be increasing taxes. We will not be paying for a tax cut. If the AMT is not patched and goes into effect, with this kind of impact, it's a tax increase. So we're not looking at a tax cut that should be paid for. This is not a new tax cut that should be paid for. This is preventing a tax increase and should not be paid for.
This year, it's estimated that with the current tax system in place, with the AMT right where it was in 2006, affecting only four million taxpayers, we're going to produce about 18.6 percent of GDP. Historically, the federal government has brought in in revenues about 18.2 percent of GDP. So we're in excess of the historical average this year with the AMT patch in place. That's what it would be if the AMT patch were in place.
So, why should we then increase taxes in the name of PAYGO to get that percent of GDP up a little higher? I submit to you, and I think Senator Grassley agrees, that we should not do that. We are getting into the federal government plenty of revenues in terms of our national income -- as a percent of our national income.
What the majority is proposing is that we increase the take to the federal government through their so-called PAYGO rules. It's not a PAYGO. It's not a PAYFOR. It's a tax increase.
So we should do this now. We should patch the AMT for 2007. We should do it without a PAYFOR because that would be a tax increase.
SEN. GRASSLEY: Yeah, we're ready for questions.
Q (Off mike) -- the Republican majority (let the ?) Democrats be -- the beginning of Congress when you didn't do a permanent fix of the AMT, you're going to fight them on how they go about getting -- (inaudible) -- PAYGO, you're going to oppose (them ?). Given that they've got to get something done, why should (they ?) listen to you about how it should be done given that you helped make the problem first, then you're going to fight them on the way they're going to try and fix it when they do try to fix it?
REP. MCCRERY: Well, as I said, in the several years past the latest that Republicans fixed this problem was June. The Democrats are in control now. As Senator Grassley said, it's their responsibility as the majority to come up with a solution. They've come up with nothing, not even a bill.
And what we're saying is, time's up. It's your responsibility to come up with something. And we're suggesting that there ought to be a patch right away with no PAYFOR. And we'd certainly support that if they helped us introduce a bill today.
SEN. GRASSLEY: And I would also suggest to you that if Republicans can be helpful to the Democrats that's what we're doing, is being helpful. Because with a point of order, 60 points -- or 60 votes to over-ride it, Republicans can help the Democrats get the super-majority they need to over-ride a point of order. In the process, what we're doing when I say we're being very helpful this way -- and I don't have the figures in my head, but I'll bet you that for every offset they're going to need known PAYFORs are about one fourth, maybe 30 percent, of what they're really going to need for offsets for doctor's fixes, Medicare, extenders. I would think that they would welcome an opportunity to have us help them get over an offset problem that everybody has.
Q Senator Grassley, is there any way that the Senate would pass some form of PAYFOR for AMT?
SEN. GRASSLEY: Right now, I'm told and I don't -- I haven't seen the names -- but there's been a polling of people in our party, of people that are very anxious to do it without offsets and to do it in a way that we can also do some other tax policy that needs to be done at the same time.
Q Chairman Rangel has said he will introduce the patch (this week ?). He also said on Friday that he has all the revenue-raising -- (inaudible). Which is the higher priority, getting it done quickly or getting it done without PAYFOR?
(Off mike.)
REP. MCCRERY: Well, I commend Chairman Rangel for finally getting a bill introduced. Of course, I haven't seen it yet. But assuming that it is introduced, if it's paid for, so to speak, it's a tax increase. And I would oppose that.
There's no reason to have a tax increase in the name of fiscal responsibility. A tax increase is a tax increase, plain and simple. And if his bill is paid for, so to speak, by increasing taxes to replace these imaginary revenues, then it's not a PAYFOR it's a tax increase. It's not fiscally responsible.
Q (Off mike.)
REP. MCCRERY: We're for an AMT patch. I mean, there's no reason not to do it.
Q (Off mike.) -- if they were going to present you with a PAYGO -- with a PAYFOR choice, allowing -- (inaudible) -- back in or allow the PAYFOR to be included, which do you pick?
REP. MCCRERY: Look, the choice is a tax increase through the AMT or a tax increase through Chairman Rangel's design. It's still a tax increase.
Q So which do you --
REP. MCCRERY: We're opposed to that.
Q Rather than wait for Democrats there has been a bill introduced on patching AMT and not PAYFOR. Have you contemplated using a discharge (petition ?) and force it to the floor?
REP. MCCRERY: Yes, we've contemplated it.
Q Is it a possibility?
REP. MCCRERY: You've been around here long enough to know that discharge petitions have very little chance of getting done.
Q Senator Grassley, there was a suggestion last week -- (inaudible) -- Senate Finance Committee meeting on the agenda that Republicans would be willing to help Democrats move the AMT without paying for it, to waive the PAYGO. If Democrats were willing to look at extending capital gains, dividends, maybe doing some little help on the estate tax, where do you stand on that and is that something Republicans are thinking about as far as the AMT without a PAYFOR?
SEN. GRASSLEY: I think that right now my party in the Senate -- I can't speak for the House -- my party in the Senate is in a posture that we want to negotiate with the Democrats on these issues. Some of my members, not all of them, some of them figuring on any one that we might get a victory for our efforts to help Democrats over this hump of getting AMT without an offset.
Q What do you think Chairman Baucus is going to do?
SEN. GRASSLEY: Well, I don't know. But I've had some indication that -- and nothing but indication because we really have not sat down in detail on this, other than the meeting that he referred to last week, and that was everybody in a meeting and it's not really a meeting where you negotiate. It's a meeting where you hear people out. But I think that he knows, as I know -- and I'm part of having a responsibility to get an answer to it.
We've got an awful lot of offsets, either saving money to offset or closing some tax loophole to offset. We've got a terrible problem raising the money that we need for all the offsets we're going to have this year without tackling it here. And I think he would be open to our helping him overcome a part of the problem that PAYGO gives the majority party.
Q Senator, back to this question of urgency, you just said that your party in the Senate is in a posture to negotiate with the Democrats -- (inaudible) -- how does that help get an AMT patch expeditiously -- (inaudible).
SEN. GRASSLEY: I would hope that we would be able to -- our hope, and there's this vast majority of our party, are willing to help in this process, meaning that we want to show them that we're willing to help them get what they need -- what some of them would admit they need, what we all want to help them do, pass AMT without offset. The bottom line of it is that we would like to have some tax policy that we would like to see accomplished, that would deal with things with the economy: the 2001 tax cut, the 2003 tax issues that have very much enhanced our economy and we think are strong evidence that we ought to continue those policies.
Q Is there a danger that Republicans could end up looking like the delayers in this -- (inaudible)?
SEN. GRASSLEY: I think that when it comes to increases in taxes or not, that we cannot look bad, particularly when you stop to think what's behind an AMT in philosophy, because it was never suppose to hit the middle class.
REP. MCCRERY: Republicans are not in control of Congress, Martin. Democrats are in control of Congress.
Q (Off mike) -- some of your colleagues have suggested that you have a political advantage, that Democrats -- (inaudible) -- and that you can use that as leverage to force Democrats to accept -- (inaudible). Do you see that political advantage? Do you see -- (inaudible).
SEN. GRASSLEY: Right now I'm in a position of negotiating and I don't intend to negotiate through the press.
Q Do you think -- (inaudible).
SEN. GRASSLEY: I think there's always trap doors around here that everybody's got to be familiar with and things of that nature. And we're all familiar with them and we've all been around long enough to see that we don't go through that trap door.
Q Senator Grassley -- (inaudible) -- many cases you've talked about the AMT. You're really angry about the fact that it was never intended for the middle class -- (inaudible) -- we can PAYFOR, we don't need to (re-attach ?) it, blah-blah. Does that mean, though, that you might support Wrangle's -- (inaudible).
SEN. GRASSLEY: I'm not for tax increases. I'm telling you that we're on the verge, if we don't do a lot of things on taxes, we're going to have the biggest tax increase in the history of this country without even a vote of Congress. And our party is committed not -- to making sure that that doesn't happen.
Q If the Republican position is that not paying forward -- is that paying for AMT would be a tax increase, is it also the Republican position that we're not on a path to have a balanced budget by 2012?
REP. MCCRERY: No, not at all.
Q But doesn't that -- doesn't both those budget projections assume revenue from AMT?
REP. MCCRERY: The budget projections of OMB assume a level of revenue sufficient to reach a balanced budget by 2012. That level of revenues is lower, as a percent of GDP, than it would be if you paid for the repeal of the AMT and you paid for extending the tax cuts. The percentage of GDP under that scenario would be 20.1 percent of GDP. The OMB budget, the president's budget, certainly does not assume revenues of 20.1 percent of GDP.
Q If a AMT measure was imposed on Democrats that was paid for by doing something about the tax gap, would that be something you guys would be in favor of?
SEN. GRASSLEY: I go back to what I've said so many times. Democrats know as well as I know that -- and I gave a speech that had a picture of a well on the chart like this. And that well of possible tax revenue raisers, offsets, whatever you want to call them -- or even just is about -- just very -- doesn't hardly fill the bottom of the well. There's a tremendous problem here with PAYGO that the majority party's gotten themselves in problems over. We're willing to help them on, with this tax issue of not having offsets. There just is not enough offsets to do everything we have to do.
Q So with the tax gap, if I'm correct it's like $345 billion annually? Is that wrong?
REP. MCCRERY: That's the gross. The Treasury actually collects about $50 billion after filing, so it's about $295 (billion) is what they estimate -- (inaudible) -- the so-called tax gap. Most of that, by the way, is small businesses, individual entrepreneurs, people who mow your grass, blow the leaves off out of your gutter. I mean, that's where most of the tax gap is and to get the vast majority of that would entail enforcement procedures that would rival Nazi Germany.
Q But isn't the $50 billion the cost of the AMT patch?
REP. MCCRERY: Fifty billion over -- (inaudible) -- say it's the cost of it.
SEN. GRASSLEY: Fifty billion is a one year.
Q Right, one year patch. So the annual -- the (gut ?) from the tax (cut ?) annually is about $50 billion and the annual on the AMT is about $50 billion. Do those --
REP. MCCRERY: I just explained, you can't capture the tax gap. You can capture little bits and pieces of it. It won't amount to $50 billion a year, I can assure you.
SEN. GRASSLEY: And we're for doing that.
Q And why not the White House' proposed (doing AMT fix ?) -- (inaudible).
SEN. GRASSLEY: I've given the same speeches on AMT for four years. It was never meant to hit the middle class. It's phantom income counted in by CBO. It shouldn't be counted. And it isn't even hitting the super rich the way it ought to -- the way it was intended to hit. I don't want to say the way it ought to hit, but the way it was intended to hit. And so, do away with the whole thing. It isn't accomplishing what it was suppose to accomplish and it was never meant to hit the middle class and ruin the middle class. And this is an example of how you're going to ruin the middle class to the tune of about $2,000. per family on average.
Q Is it a little dangerous to declare opposition to a PAYFOR patch without knowing what those offsets are? What if Chairman Rangel comes back with -- he's talking about issues of income inequality. What if he comes back with taxes on hedge fund managers, (private equity ?) funds, some of Senator Grassleys's proposals on loop hole -- (inaudible) -- and other types of things that -- (inaudible). Aren't the politics of that going to be a little bit different than the juxtaposition of preventing a tax increase on the middle class being paid for with tax increases on the extremely wealthy people?
SEN. GRASSLEY: Why should you be raising money to offset a tax that was never intended to be collected?
Q (Off mike.) -- president's budget may not balance -- (inaudible). The budget the Democrats (proposed ?) and the budget the Republicans proposed this spring relies on that revenue -- (inaudible).
REP. MCCRERY: Well let's just say -- I mean, if the Democrats want to propose extending all of 2001-2003 tax cuts in paying for the AMT , maybe we could talk. But I don't see them doing that.
SEN. GRASSLEY: I've got to go, you guys, because I had an 11 o'clock meeting. I just -- (inaudible) -- I'm ten minutes late.
Q Is it a meeting on taxes?
SEN. GRASSLEY: We will be talking taxes, but a lot of other things, more difficult.
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