Seven months into the session, Congress has done nothing to fix the alternative minimum tax mess. It has now become highly unlikely that Congress will enact a permanent fix for the AMT this year, though it could affect 27 million middle-class taxpayers.
In all likelihood, the best Congress will manage this year is a one-year patch passed at the last moment.
Financial planners and accountants should be preparing their clients for the possibility, if not the probability, that they will be paying the AMT this year, even if there is such a patch.
Last year, an estimated 4 million taxpayers were affected by the AMT.
If Congress passes a bill to reduce the number of taxpayers hit by the tax this year, the number affected likely will be greater than 4 million.
The trouble with a last-minute congressional fix is that it increases the possibility of a mistake's being made in drafting the law so that far more people than intended might be caught by it.
Congress should have addressed the AMT problem earlier this year. Unfortunately, it is addicted to the revenue the AMT generates.
According to the Congressional Budget Office, if left unchanged, the AMT will bring in more than $1 trillion over the next 10 years.
The best hope for a permanent fix of the AMT is in 2008, an election year.
Congress will be reluctant to head into the election season with more than 30 million likely voters facing the pain of the alternative minimum tax two months later.
