Aug. 8 (Bloomberg) -- Iowa Senator Charles Grassley said he intends to link his proposal to boost taxes on publicly traded buyout firms to a fix of the alternative minimum tax, a pairing that may make it harder for opponents of the measure to vote against it.

``This is going to come when we deal with the alternative minimum tax,'' Grassley, a Republican, said in an interview in Sidney, Iowa yesterday. He said the bill deals with ``issues of equity and fairness.''

The strategy would partner legislation to raise taxes on publicly traded partnerships such as Blackstone Group LP to a measure shielding 23 million mostly middle-income households from an AMT increase this year. It's a tactic that has worked in the past: last year Republicans successfully paired an AMT relief measure to an extension of a capital-gains tax cut that was opposed by many Democrats.

Grassley, 73, the ranking member of the Senate Finance Committee, and the committee's Democratic Chairman, Max Baucus of Montana, introduced the bill that would make buyout and hedge-fund firms that go public pay taxes as corporations at rates as high as 35 percent. Under the current system, partners in these firms pay taxes at individual rates as low as 15 percent.

Last week, House Ways and Means Committee Chairman Charles Rangel, a New York Democrat, said he intends to combine related legislation that would more than double the personal taxes for managers of private-equity firms and hedge funds with a measure curtailing the AMT.

`Good Use'

``That would be a good use for it,'' Grassley said of Rangel's plan. Grassley said he has not decided yet whether to support the House proposal but agreed that any tax revenue gained from such measure should be used to protect more middle class taxpayers from paying the AMT.

The comments of the two lawmakers suggest that the bills may be considered earlier than expected. Senate Majority Leader Harry Reid, a Nevada Democrat, said in an interview last month that he didn't expect the Senate to act on any tax-raising legislation until 2008.

Rangel is a co-sponsor of legislation proposed by Michigan Representative Sander Levin that would tax the share of profits that mangers receive in exchange for investment services as wages, at rates as high as 37.9 percent. That income, known as carried interest, is currently taxed at the 15 percent capital- gains rate.

Combining the measures would generate a small portion of the revenue needed to pay for overhauling the alternative minimum tax under pay-as-you-go budgeting rules adopted by Democrats earlier this year. Unless Congress acts, the AMT will impose a $45 billion tax increase on 23 million households in 2007; permanently repealing the levy would cost the government more than $1 trillion in foregone revenue.

To contact the reporter on this story: Alison Fitzgerald in Washington at Afitzgerald2@bloomberg.net

Last Updated: August 8, 2007 06:17 EDT