The Expanding Reach of the Individual Alternative Minimum Tax

Journal of Economic Perspectives, Vol. 17, No. 2, pp. 173-186, Spring 2003

14 Pages Posted: 4 Feb 2011

See all articles by William G. Gale

William G. Gale

Brookings Institution

Leonard E. Burman

Tax Policy Center; Maxwell School; Urban Institute; Syracuse University - Center for Policy Research

Jeffrey Rohaly

Urban Institute

Date Written: 2003

Abstract

In January 1969, Treasury Secretary Joseph W. Barr informed Congress that 155 individual taxpayers with incomes exceeding $200,000 had paid no federal income tax in 1966. The news created a political Ž restorm. In 1969, members of Congress received more constituent letters about the 155 taxpayers than about the Vietnam War. Later that year, Congress created a minimum tax to prevent wealthy individuals from taking advantage of tax laws to eliminate their federal income tax liability.

Both the original minimum tax and its successor, the individual alternative minimum tax (AMT), have applied in the past to a small minority of high-income households. But barring a change in law, this "class tax" will soon be a "mass tax." Current projections show the number of AMT taxpayers skyrocketing from one million in 1999 to 36 million in 2010. Without reform, virtually all upper middle-class families with two or more children will be paying the AMT by decade’s end. The AMT is notoriously complex, and its record on fairness and efficiency is mixed at best. But because of its widening reach, fixing the AMT will be expensive. By the end of the decade, repealing the AMT will cost more than repealing the regular income tax. This paper explains how a tax originally designed to target 155 taxpayers could grow to cover 36 million, discusses economic issues related to the alternative minimum tax and examines options for reform.

Keywords: Individual AMT, alternative minimum tax, tax policy

JEL Classification: H24

Suggested Citation

Gale, William G. and Burman, Leonard E. and Rohaly, Jeffrey, The Expanding Reach of the Individual Alternative Minimum Tax (2003). Journal of Economic Perspectives, Vol. 17, No. 2, pp. 173-186, Spring 2003. Available at SSRN: https://ssrn.com/abstract=1754662

William G. Gale (Contact Author)

Brookings Institution ( email )

1775 Massachusetts Avenue, NW
Washington, DC 20036
United States
202-797-6148 (Phone)
202-797-6181 (Fax)

Leonard E. Burman

Tax Policy Center ( email )

Urban Institute
2100 M Street NW
Washington, DC 20009
United States
2022615742 (Phone)

Maxwell School ( email )

400 Eggers Hall
Syracuse, NY 13244
United States
315-443-3114 (Phone)

Urban Institute ( email )

2100 M Street, NW
Washington, DC 20037
United States
202-261-5248 (Phone)

Syracuse University - Center for Policy Research ( email )

Syracuse, NY 13244
United States

Jeffrey Rohaly

Urban Institute ( email )

2100 M Street, NW
Washington, DC 20037
United States

HOME PAGE: http://www.taxpolicycenter.org

Register to save articles to
your library

Register

Paper statistics

Downloads
28
Abstract Views
409
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information