I suggested a few weeks back that the carried interest tax bill looked dead on arrival, due to near-unified GOP opposition and rapid back-peddling by some key Democrats. This also held true for various hybrid schemes, including one that mimicked the 60/40 rule and another that would consider the length of time a security was held. It just looked like any change would be viewed by Congress as an assault on capital gains and/or campaign contributions.
But lo and behold, there is now a different type of hybrid scheme that has nothing to do with the actual mechanics of carried interest taxation. And it will be much trickier for opponents to shunt aside. That’s right, dear reader, the dead is rising…
The new plan would link private equity tax changes to AMT relief for the 23 million taxpayers who are currently slated to get socked come next April. Senator Chuck Grassley (R-IA) told Bloomberg that he plans to link his “Blackstone Bill” to AMT relief, while Rep. Charles Rangel (D-NY) has said the same thing for the more sweeping carried interest bill introduced in June by Rep. Sandy Levin (D-MI).
I haven’t yet talked to the right people (sorry, busy putting morning), but this certainly sounds like a masterstroke. Members of both parties believe that the AMT needs to be bandaged this year – albeit not repealed – as 23 million people is a fairly large voting block.
Perhaps more importantly, there is recent precedent. Just last year, Republicans wanted to extend the capital gains tax cut, while Democrats promised a fight. The GOP responded by tying AMT relief to the capital gains extension, and was able to secure passage for the hybrid bill. Looks like Grassley and Rangel are returning to the well.