The Alternative Minimum Tax

       Remember the AMT? That would be the alternative minimum tax which the government has taken to living off of, somewhat.

From the Tax Policy Center , we get some recent TPC analyses of the AMT, which examine the expanding reach of the tax and consider options for reform.

   An example for you.

News & Events

The Individual Alternative Minimum Tax (AMT): 11 Key Facts and Projections

Len Burman, Julianna Koch, and Greg Leiserson
December 1, 2006
Available in PDF

The individual alternative minimum tax (AMT) was originally enacted in 1969 to guarantee that high-income individuals paid at least a minimal amount of tax. Middle- and upper-income taxpayers must add a number of so-called "preference items" to their taxable income, subtract a special AMT exemption, and calculate their tax according to the AMT tax schedule. If the tax under that schedule is higher than the regular income tax, taxpayers pay the difference as AMT.

1. AMT is exploding. In 2007, unless Congress acts, 23.4 million taxpayers will be affected by the AMT. In 2006, only 3.5 million taxpayers will owe the tax because of a temporarily higher exemption, which expires at the end of the year. By comparison, back in 1970, just 20,000 taxpayers were affected. If the 2001-2006 tax cuts expire as scheduled at the end of 2010, 39 million taxpayers (more than one-third) will be hit by the AMT in 2017. If the tax cuts are extended, the number jumps to 53 million taxpayers (49 percent). (Tables T06-0266 and T06-0267)     Complete Analysis

   This example all by itself makes Bush's tax cuts a tax increase over time, except for the really wealthy.

 

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