House votes to block hike in alternative minimum tax

WASHINGTON — Under pressure to prevent a big tax increase next year for millions of middle-income families, the Republican-controlled House passed a bill Wednesday that would block an increase in the alternative minimum tax for one year at a cost of $30 billion.

The measure, approved 414-4, would prevent a tax increase for 2006 that would have affected about 15 million people nationwide.

"It's been called the stealth tax, a ticking time bomb for the middle class, and even the Darth Vader of the tax code," said Rep. Thomas M. Reynolds, R-N.Y., who sponsored the bill.

But while the vote was almost unanimous, the bill's prospects remain entangled in a broader battle in Congress over President Bush's tax cuts. If House Republicans push through their entire agenda, those cuts could total more than $90 billion over five years.

In addition to voting on the alternative minimum tax, the House approved $7.1 billion in tax cuts for Gulf Coast areas damaged by Hurricane Katrina. But in a split with the Senate, the House bill would prohibit any of those tax cuts from going to casinos, racetracks and country clubs.

Today, House leaders hope to win approval for a $56 billion tax cut that would extend Bush's tax cuts for stock dividends.

House and Senate Republican leaders also edged closer on Wednesday toward an agreement to cut as much as $50 billion over the next five years from domestic programs like Medicaid, food stamps, student loans and child-support enforcement. In a rush to finish as much work as possible before Christmas, the House also passed a bill, ardently sought by lawmakers from New York and other major cities, that would extend federal subsidies for terrorism-risk insurance.

The main focus on Wednesday was tax cuts, and in particular another one-year cut in the alternative minimum tax, or AMT.

The tax was originally created to stop the nation's wealthiest people from taking too much advantage of special tax breaks. But in part because it is not adjusted for inflation, the tax is set to engulf millions of families with incomes below $100,000.

The battle in Congress is not over the alternative minimum tax itself, but over whether it should be included in a $70 billion package that would include an extension of Bush's 2001 tax cuts for stock dividends and capital gains.