Dec. 7 (Bloomberg) -- Congress moved closer to protecting 23 million households from the alternative minimum tax as Senate Democrats dropped a demand to link it to a tax increase on executives at private equity firms and hedge funds.
The Senate approved a one-year, stop-gap measure that temporarily indexes the minimum tax for inflation, sparing 23 million American households from an average tax increase of $2,000 this year.
The 88-5 vote puts pressure on the House to abandon its own legislation that links the minimum tax relief, aimed at middle- class families, to higher taxes on executives of hedge funds, buyout firms, as well as real estate and other partnerships.
Senate Majority Leader Harry Reid said House Democrats would accept the Senate action. Minutes later, House Ways and Means Chairman Charles Rangel, a New York Democrat, issued a statement saying he would try to alter the Senate measure to close a tax loophole that allows hedge fund managers to defer taxes on money in offshore accounts.
``The House will consider these amendments so that we may give the Senate another chance to do the right thing and pass responsible AMT relief,'' Rangel said.
Rangel earlier yesterday said he wouldn't oppose removing a provision that would boost the tax on so-called carried interest, the performance fees that managers of private equity firms, hedge funds and some real estate and oil and gas partnerships earn.