The Alternative Minimum Tax and Effective Marginal Tax Rates

34 Pages Posted: 1 Dec 2003

See all articles by Daniel R. Feenberg

Daniel R. Feenberg

National Bureau of Economic Research (NBER)

James M. Poterba

National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2003

Abstract

This paper examines the impact of the Alternative Minimum Tax on the weighted average marginal tax rates that apply to various components of taxable income. It also considers the impact of several AMT reform proposals on the number of AMT taxpayers, the total revenue collected from the AMT, and the weighted average marginal tax rates that apply to wages, capital income, and deductions such as state and local taxes and charitable gifts. The paper uses the NBER TAXSIM model to project federal personal income tax liabilities as well as AMT liabilities between 2003 and 2013. The AMT has only a modest impact on the average marginal tax rates for most sources of income because some AMT taxpayers face higher marginal tax rates, and others lower tax rates, as a result of the tax. The projections show that modest increases in the AMT exclusion level have substantial effects on the number of AMT taxpayers, and that indexing the AMT parameters would reduce the number of AMT payers in 2010 by more than sixty percent. These changes would also reduce the AMT's impact on average marginal tax rates.

Keywords: Income taxation, alternative minimum tax

JEL Classification: H24, H62

Suggested Citation

Feenberg, Daniel R. and Poterba, James M., The Alternative Minimum Tax and Effective Marginal Tax Rates (October 2003). MIT Department of Economics Working Paper No. 03-37. Available at SSRN: https://ssrn.com/abstract=470601 or http://dx.doi.org/10.2139/ssrn.470601

Daniel R. Feenberg

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
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617-588-0343 (Phone)

James M. Poterba (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
E52-350
Cambridge, MA 02142
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617-253-6673 (Phone)
617-253-1330 (Fax)

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