The Individual Alternative Minimum Tax

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The individual alternative minimum tax (AMT) was intended to guarantee that high income people paid at least some tax, but it is poorly designed in several respects. Most notably, it is not indexed for inflation, which means that normal price level increases cause more and more comparatively modest-income households to be subject to the complicated shadow tax system. In addition, the tax does not effectively close the shelters it is intended to address, in part because of the way it treats capital gains. The individual income tax cuts enacted in 2001 and 2003 will exacerbate this problem. In consequence, absent a change in law, close to 30 million taxpayers will become subject to the AMT by 2010.

The Tax Policy Center has written extensively about the AMT.¹ This data update presents new data for the tables in our July 2003 Tax Notes article and expands on the reform options presented in the Spring 2003 Journal of Economic Perspectives article. We also briefly explain the tables. We will release a complete report focusing on reform options in the Fall.

Notes from this section

1 See, e.g., Leonard E. Burman, William G. Gale, and Jeffrey Rohaly, "The AMT: Projections and Problems," Tax Notes, July 7, 2003; and Leonard E. Burman, William G. Gale, and Jeffrey Rohaly, "The Expanding Reach of the Individual Alternative Minimum Tax," Journal of Economic Perspectives, Volume 17, Number 2, Spring 2003. Both articles are available online at www.taxpolicycenter.org.

Note: The Portable Document Format (PDF) of this report includes all tables and charts.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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