August 9, 2007 (LPAC)--Iowa Senator Charles Grassley (R) said that he intends to link his proposal to boost taxes on publicly traded "leveraged buyout" firms, to a fix of the alternative minimium tax (AMT) which both Democratic and Republican leaders in Congress are looking for. Grassley said that pairing his bill with a reform of the AMT--so that it would apply to many fewer, higher-income households only--would make it harder for opponents to vote against it.

The fact that Senator Grassley is, in effect, embracing the strategy of Rep. Charles Rangel (D-N.Y.), chairman of the House Ways and Means Committee and sponsor of a somewhat tougher private-equity tax bill, means that legislation to make wealthy private-equity managers pay the corporate tax rate on their income, could move faster in Congress than had been expected.

Grassley's proposal would increase the tax rate paid by private-equity firms and hedge funds to 35%, if the firms had made public stock offerings. Under the current system, these firms' managers pay a lower capital-gains tax rate of 15%. Rangel's House bill would apply to higher form of taxation to managers of all private equity takeover firms, not just those othat had issued public stock.

Rangel had previously said that he intends to combine a tax increase for the private-equity firms and hedge funds, with a measure curtailing the AMT.

Wall Street fiercely opposes the bill, and so does Treasury Secretary Henry Paulson. In fact, on Aug. 8 Paulson and his President George W. Bush called for lowering corporate taxes overall.