Democrats unveil $1 trillion tax plan aimed at easing burden for the lower and middle classes

WASHINGTON — The House's top Democratic tax writer on Thursday unveiled a $1 trillion plan to repeal the alternative minimum tax and lower the tax burden of most lower- and middle-income people.

The proposal would be paid for by requiring the wealthy and some corporations and investors to contribute more.

In laying out the plan that would effectively rewrite many of the tax policies put in place under Republican control of Congress, Rep. Charles Rangel of New York said the changes would bring a net tax reduction to almost all families with incomes under $500,000 and that some 91 million families would receive tax relief.

The package, introduced by the Ways and Means Committee chairman at a news conference, includes a one-year temporary fix to shield middle-income families who might get hit by the alternative minimum tax and several dozen extensions of specific tax credits now available to teachers, veterans, those with education expenses and others.

The more far-reaching changes in the tax code will probably not come up for a vote in the House until next year, but Democratic leaders have indicated they will move quickly on the stopgap AMT measure and the extensions.

Republicans quickly voiced strong opposition to the long-term plan. "This is the largest individual income tax increase in history," Rep. Jim McCrery of Louisiana, Rangel's low-key GOP counterpart on the committee, wrote fellow Republicans. Rangel, he said, "is selling pure snake oil."

Republicans in recent days have prodded Democrats to act on the AMT issue. Treasury Secretary Henry Paulson on Tuesday warned in a letter to Congress that failure to pass an AMT fix soon would expose 21 million taxpayers to the tax, with an average tax increase of $2,000.

The AMT was created in 1969 to ensure that a very small number of wealthy people couldn't use tax breaks or deductions to eliminate their entire tax liability. But the tax was not indexed to inflation, and every year more people are exposed to it. Nearly 4 million taxpayers were subject to the AMT in 2006, and the number is expected to multiply in 2007.

The Rangel proposal would extend for one year the current-law AMT relief for nonrefundable personal credits, at an estimated cost of $47 billion over 10 years.