On October 25, 2007, Chairman Charles B. Rangel of the House Ways and Means Committee announced his tax revision proposal, H.R. 3970 , the Tax Reduction and Tax Reform Act of 2007. The most significant provisions, measured by revenue effect, were a revision in 2007 and subsequent repeal of the individual alternative minimum tax (AMT) and an additional tax on high-income individuals. The proposal also contained tax cuts for lower-income taxpayers, some tax increases on high-income individuals, several base broadening provisions, one-year extensions of a number of expiring tax provisions, and a corporate and business revision package that included rate reduction and base broadening. The 2007 AMT provision, the extenders, and some other provisions are also included in a tax bill subsequently passed by the House ( H.R. 3996 ). The 2007 AMT provision was eventually enacted in P.L. 110-166 . Current bills also include some provisions, including some revenue raisers: H.R. 6275 to extend the AMT revision for another year, and H.R. 6049 , which includes the extension of expiring provisions. Table 1 shows the major provisions and categories of minor provisions of H.R. 3970 . The AMT provision includes a one year "patch" that would extend temporary increases in the exemption and credits that prevent the AMT, a provision originally targeted at very high-income individuals, from affecting many upper middle class taxpayers. The AMT revisions would lose revenues projected at $845.2 billion over the 10-year period FY2008-FY2017. Roughly offsetting this loss is an increase in taxes on higher-income individuals, in the form of an increased tax rate of 4% and 4.6%, which would gain $831.7 billion in revenues. These amounts are slightly under 5% of total individual income tax revenue projected to be collected over the 10-year period. In addition to these major provisions, there are $86 billion in tax cuts for lower-income individuals, including an increase in the standard deduction, the earned income credit, and the refundability of the child credit. There are also additional taxes on higher-income individuals in the form of restrictions on itemized deductions and personal exemptions. There are also a series of base broadening provisions, with the most significant ones increases in taxes on investment managers. The proposal also includes one-year extensions of 37 tax benefits that are scheduled to expire, mostly at the end of 2007. The most significant of these are the research and experimentation credit, the deduction for state and local sales taxes, and the 15-year recovery period for certain lease-hold improvements and restaurant property. Finally the proposal reduces the top corporate tax rate from 35% to 30.5%, with the change offset by a series of base broadening provisions, with the most important ones repealing the domestic production activities deduction, a set of international tax provisions, and two inventory revisions. As indicated by the table, the individual section is essentially revenue neutral (raising as much revenue as it loses), the extenders have a very small loss, and the corporate revisions a very small gain. Overall the bill has a negligible effect on revenues over a 10-year period. Note, however, that these measures reflect the standard baseline for legislative proposals that assumes the 2001 tax cuts are allowed to expire. Were the tax cuts to be extended, the revenue loss associated with the repeal of the AMT would be larger, or, to put it another way, if H.R. 3970 were enacted, the cost of extending the tax cuts would be larger. This interaction occurs because the lower tax rates enacted in 2001 were not fully realized (were "taken back") for many taxpayers, especially as time passed, because these taxpayers were subject to (or became subject to) the AMT. The provisions in the bill that provide the AMT patch through 2007 and the extenders are included in H.R. 3996 , a bill passed by the House on November 9, 2007 that deals with more immediate issues. The revenue cost of the AMT patch in that bill is $50.6 billion, as compared to $49.6 billion in H.R. 3970 . The difference apparently reflects a larger increase in the AMT exemption to allow for real income growth. The individual tax revisions constitute the major portion of the bill, in size of tax changes. The individual tax package is roughly revenue neutral, but it redistributes tax burdens. The sections below discuss the revisions and some of the issues associated with them. The final section summarizes the overall distributional effect. The AMT has become a major issue and eliminating it and paying for the resulting revenue cost is the most important feature of the bill in terms of revenue. The objective of the AMT was originally to impose taxes on higher-income individuals who were otherwise paying low taxes because of tax preferences (i.e., tax benefits). Because AMT exemptions were not indexed for inflation, and because of other revisions, the AMT began to affect individuals in the upper middle incomes, and no longer affected the very highest income individuals. Increasingly the AMT is a tax that is triggered by provisions that it was not originally focused on, such as personal exemptions and certain itemized deductions. The bill's AMT provisions are in two parts: an extension of the "patch" for 2007 (costing $49.6 billion) which increases and indexes the exemption from the AMT and extends allowances of certain credits, and the subsequent repeal of the AMT (costing $797.7 billion). Without the patch, the AMT, which initially applied to less than 20,000 taxpayers, and applied to 3.5 million in 2006, will affect 24 million taxpayers in 2007. These amounts will grow over time. H.R. 3970 contains three provisions targeted at lower-income individuals that cost $86 billion overall: an increase in the standard deduction; an increase in the earned income credit for families without children; and an increase in the refundability of the child credit. The revenue cost of the components is shown in Table 2 . The bill would increase the standard deduction by $850 for married couples, $425 for singles, and $625 for heads of households. The standard deductions for 2007 are currently $10,700, $5,350, and $7,850 respectively. This change would increase the number of lower-income taxpayers who do not pay taxes, and also decrease the share of taxpayers that itemize, a change that would simplify tax compliance. This increase in the standard deduction accounts for $47.9 billion of the revenue loss. The proposal would also increase the earned income tax credit for single individuals and married couples without children, as well as the credit's phase out range. These families receive a small earned income tax credit of 7.65% on income up to $5,590, compared to a 34% credit for families with one child and 40% for families with two children, both applicable to larger incomes. The credit phases out (for 2007) at $12,590 for singles and $14,590 for childless couples. The proposal would increase the amount eligible for the credit from $5,280 to $10,900 and the credit rate to 15.3%. This provision costs $29.1 billion. Some might resist the expansion of the earned income credit to families without children, taking the view that the program is a welfare program run through the tax system and thus should be directed at the more vulnerable population as are many other welfare programs (such as Medicaid and general income support programs). From the viewpoint of tax equity, however, the restricted benefits for those without children cause poor families without children to pay taxes while families with children that have a much higher standard of living have tax subsidies, which are enhanced by the child tax credit. The third proposal would increase the refundability of the child tax credit, that is, the rebate of the tax for families with little or no tax liability. Currently, the child tax credit is refundable for 15% of income over $11,300; hence the credit is not refundable or fully refundable to low-income families. The proposal would decrease the threshold to $8,500 and no longer index it, so it would continually decline in real value over time. This provision costs $9.1 billion. Three revenue raising provisions apply to high-income individuals and roughly offset the losses associated with the repeal of the AMT: a tax on high adjusted gross incomes, a restoration of provisions that phase out personal exemptions and itemized deductions for high-income taxpayers, and an increase in the floor for miscellaneous itemized deductions. The revenue impact of the provisions is shown in Table 3 . By far the largest of these provisions, an $831.7 billion revenue gain, is a proposal to impose a surtax of 4% on adjusted gross income above an amount that would be set by the Treasury Secretary where 90% of individuals above that amount would otherwise be subject to the AMT. This amount would, however, not be less than $200,000. There would be an additional 0.6% tax on incomes above $500,000 ($250,000 for singles), for a total additional tax of 4.6% on such income. Unlike an ordinary rate increase, these increased taxes would apply to adjusted, not taxable, income. Thus they would increase tax rates on all income whether or not it is eligible for preferences such as itemized deductions or lower rates (Capital gains and dividends are taxed at a maximum rate of 15% through 2010; after that point the dividend preference will end and the capital gains tax will rise to 20%). The second provision would restore the phase out of personal exemptions and itemized deductions for high-income individuals, commonly referred to as PEP and Pease. Under the terms of the 2001 tax cut, these phase outs were to be gradually eliminated.