More than 30 million households could be hit with the Alternative Minimum Tax (AMT) if Congress doesn’t take action after the election, adding another pressure point to talks on the “fiscal cliff.”
Democrats and Republicans agree that Tuesday’s election will go a long way toward determining which party has leverage in the post-election negotiations on taxes and spending.
But congressional aides and tax lobbyists say fixing the AMT could be a rare area of agreement between the parties, regardless of how the election shakes out.
“An AMT patch simply has to get done by the beginning of January, and both sides know it,” said one Democratic aide on the Hill.
The task at hand could be complicated, however, by the bitter debate over the Bush-era tax rates. Democrats only want to extend those rates for family income up to $250,000, while Republicans want to continue them for all taxpayers.
If lawmakers deadlock on the Bush-era rates, action on the AMT could be delayed into 2013 — a scenario that tax experts say could cause bedlam for the IRS as millions of taxpayers file amended returns.