Citation URL: http://www.urban.org/JuliannaKoch

Congress originally enacted a minimum tax in 1969 to guarantee that high-income individuals paid at least a minimal amount of tax. Under today’s alternative minimum tax (AMT), middle- and upper-income taxpayers must add a number of "preference items" to their taxable income, subtract a special AMT exemption, and calculate their tax according to the AMT rules. If the tax under those rules turns out to be higher than their regular income tax, taxpayers pay the difference as AMT. Unless Congress acts, 26.8 million taxpayers will be affected by the AMT in 2008.

Corporations that are taxed under subchapter C of the Internal Revenue Code pay a separate entity-level tax on their income (the corporate income tax) and their owners pay additional tax on corporate dividends and capital gains on sales of corporate shares. Other businesses are taxed as flow-through entities; they file tax returns and report their income but do not pay an entity-level tax. This article discusses the decline in both the share of businesses organized as C corporations and their share of business receipts between 1994 and 2004.

Discussions of the federal budget often refer to mandatory spending — on Social Security, Medicare, and similar programs — as "uncontrollable." In contrast with discretionary programs that Congress usually funds with annual appropriations, entitlement spending is determined by permanent laws specifying who qualifies for what benefits. This article examines changes in the percentage distribution of federal outlays since 1962. It highlights the rapid growth in mandatory spending driven by increased spending for health and retirement programs and the contrasting decline in defense spending as a share of total spending.

The individual alternative minimum tax (AMT) was originally enacted in 1969 to guarantee that high-income individuals paid at least a minimal amount of tax.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. This document outlines 11 key facts and projections about the AMT, including its effects on taxpayers and prospects for its reform.

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