The Individual Amt: Problems and Potential Solutions
Tax Policy Center Discussion Paper No. 5
69 Pages Posted: 19 Sep 2002
Date Written: August 13, 2002
Originally targeted at high-income households, the individual alternative minimum tax (AMT) is now on the verge of switching from a "class" tax to a "mass" tax. Under current law, the AMT will encroach dramatically on the middle-class over the next decade and will become the de facto tax system for upper-income households. These changes occur because of the non-indexation of the AMT for inflation and the tax cuts enacted in 2001. The trends are troubling because the AMT is notoriously complex, its effects on efficiency and equity are questionable, and its underlying purpose is controversial. This paper provides information on the AMT, its economic effects, and options for policy reform, and is intended to help inform the debate and the eventual reforms that will be required in the near future.
Keywords: Alternative minimum tax, tax complexity, equity, efficiency
JEL Classification: H2, H3
Suggested Citation: Suggested Citation