AMT Redux

After a brief winter break, the AMT wars have resumed.

By next week, the House will pass a fiscal 2009 budget that, among other things, would extend the annual Alternative Minimum Tax patch for another year. The House Budget Committee projects this would keep 20 million mostly middle class taxpayers off the dreaded levy. But, as it did last year, the House will also insist that the $62 billion fix be paid for with offsetting tax hikes.

The budget panel didn't say whose taxes would be raised—that will be the job of the House Ways & Means Committee. It doesn't take too much imagination, though, to figure the targets will once again include hedge fund managers and private equity firms. We have seen this movie before.

Last year, the House's effort to pay for an AMT fix died in the Senate, where Republicans joined liberals such as Chuck Schumer (D-N.Y)—a Wall Street ally—to block a vote. The White House and most Senate Republicans say they will do all they can to bury the idea again. Senate Budget Committee Chairman Kent Conrad (D-N.D.) already says he has "grave doubts" the Senate would pay for a patch.

Besides the never-ending AMT battle, this year's fiscal war will be a desultory affair. Congressional Democrats will fight with President Bush over $18 billion in domestic spending and probably end up splitting the difference, as usual. Republicans will try to extend all of the Bush 2001 and 2003 tax cuts. Democrats will vow to renew only the middle class provisions. But the real fate of those tax breaks won’t be decided until after a new President and Congress are sworn in 10 months from now.

The real show will be over the AMT and whether who, if anyone, pays to patch it for another year. If nothing else, the squabble will be a boon to the local economy in Washington, where lobbyists were starting to worry about what they were going to do for the rest of this year.