**Statement of Senator Arlen Specter**

**Specter Amendment #2557**

Mr. President, I have sought recognition to discuss an amendment to H.R.
976, the Small Business Tax Relief bill. H.R. 976 will serve as a
vehicle for legislation to reauthorize the State Children's Health
Insurance Program (SCHIP) in the Senate. My amendment is identical to
legislation (S. 734) I offered on March 1, 2007, to bring the
Alternative Minimum Tax (AMT) back "in line" with the regular individual
income tax by reducing its rate back to 24 percent. The 1993 AMT rate
increase has contributed greatly to the problem of unintended taxpayers
seeing increased tax liability.

The AMT is a flawed income tax system and there are many arguments for
full repeal. It is important to keep in mind that the first version of
the AMT was created in 1969 in response to a small number of high-income
individuals who had paid little or no federal income taxes. Today,
between a lack of indexing for inflation and higher AMT tax rates
relative to the regular income tax system, we have a tax system which
has grown far beyond its intended result. Absent legislative action, the
number of taxpayers subject to AMT liability will to rise sharply from
3.5 million filers in 2006 to 23 million in 2007. According to the
Congressional Research Service (CRS), 874,000 taxpayers in Pennsylvania
will pay the AMT in 2007 if no action is taken.

The Senate has had ample opportunity to address AMT in 2007. The Senate
has already rejected four efforts to provide taxpayers with meaningful
relief from the AMT in this first session of the 110th Congress.
However, all attempts have been rejected:

-   On July 20, 2007, I voted in support of a Kyl amendment to the
    Education Reconciliation Bill, which would have fully repealed the
    AMT;

-   On March 23, 2007, I voted in support of a Lott amendment to the
    Budget Resolution, which would have allowed for repeal the 1993 AMT
    rate increase;

-   On March 23, 2007, I voted in support of a Grassley Amendment to the
    Budget Resolution, which would have allowed a full repeal of the
    AMT; and

-   On March 23, 2007, I voted in support of a Sessions Amendment to the
    Budget Resolution, which would have allowed families to deduct
    personal exemptions when calculating their AMT liability.

    This onerous tax is slapped on average American families largely
    because the AMT is not indexed for inflation (while the regular
    income tax is indexed) and taxpayers are "pushed" into the AMT
    through so-called "bracket creep." Temporary increases in the AMT
    exemption amounts expired at the end of 2006. The Economic Growth
    and Tax Relief Reconciliation Act of 2001 increased the AMT
    exemption amount effective for tax years between 2001 and 2004; the
    Working Families Tax Relief Act of 2004 extended the previous
    increase in the AMT exemption amounts through 2005; and the Tax
    Increase Prevention and Reconciliation Act of 2005 increased the AMT
    exemption amount for 2006.

    In addition to the well-known issue of the need to index the AMT
    exemption amount for inflation, the AMT tax rate relative to the
    regular income tax must also be addressed to keep additional
    taxpayers who were never intended to pay the AMT from being subject
    to its burdensome grasp. In 1993, President Clinton and a
    Democrat-controlled Congress imposed a significant tax hike on
    Americans through the regular income tax. At the same time, the AMT
    tax rate was also increased from 24 percent to 26 percent for
    taxable income under \$175,000 and from 24 percent to 28 percent for
    taxable income that exceeds \$175,000. These changes are now
    slamming the middle-class and have only been made worse by the tax
    relief enacted in 2001 and 2003. Ironically, by reducing regular
    income tax liabilities without substantially changing the AMT, many
    new taxpayers were pushed into these higher AMT tax rates created
    in 1993. However, the problem is not the 2001/2003 tax relief, it
    was the 1993 tax increase.

    According to revenue estimates calculated by the Joint Committee on
    Taxation, repeal of the 1993 AMT rate increase would cost \$425
    billion over the 2007-2017 period. In tax year 2007, 7.6 million
    filers would be removed from the AMT if the '93 AMT rate is
    repealed; and 13.2 million filers will be spared in 2017.

    Millions of taxpayers have been sucked into AMT liability as a
    result of the 1993 AMT rate increase, and it would be the wrong
    approach to "fix" the AMT by increasing taxes yet again. In
    addition, some may argue that this amendment is fiscally
    irresponsible because the lost revenue is not fully offset. However,
    it is highly questionable to justify raising taxes elsewhere to
    account for lost revenue that was never intended to be collected.

    The AMT is a flawed income tax system and there are many arguments
    for full repeal. At the very least, we should take steps to undo
    past mistakes, most notably the 1993 AMT rate increase. In what will
    likely be the final attempt to address AMT before we head home to
    speak with our constituents during the August recess, I implore my
    colleagues to cast an aye vote for my amendment. Twenty-three
    million Americans are counting on it.

    I ask consent to enter into the record several articles published in
    the Wall Street Journal advocating for a repeal of the 1993 AMT rate
    increase.

    This legislation is supported by Americans for Tax Reform and by the
    National Taxpayers Union. I ask consent to enter into the record
    letters of support from Americans for Tax Reform (ATR) and the
    National Taxpayer Union (NTU).

I yield the floor.