Tax Policy Center: Individual Alternative Minimum Tax

Top Individual Income Tax Rates: How Does the U.S. Compare?

info@taxpolicycenter.org ( Jim Nunns) — Wed, 03 Apr 2013 00:00:00 EST

Discussions of the effect of taxes on international competitiveness usually focus on corporate income tax rates, but individual income tax rates may also affect a countrys (or states) ability to compete for workers.

The Future of Individual Tax Rates: Effects on Growth and Distribution : Donald Marron's Testimony Before the Senate Committee on Finance

info@taxpolicycenter.org ( Donald Marron) — Wed, 14 Jul 2010 00:00:00 EST

Donald Marron's testimony before the Senate Committee on Finance on the individual tax system.

The Future of Individual Tax Rates: Effects of Economic Growth and Distribution : Leonard Burman's Testimony before the Senate Committee on Finance

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 14 Jul 2010 00:00:00 EST

Leonard Burman's testimony before the Senate Committee on Finance on whether and how to extend the 2001 and 2003 tax cuts.

Preliminary Revenue Estimates and Distributional Analysis of the Tax Provisions in the Bipartisan Tax Fairness and Simplification Act of 2010

info@taxpolicycenter.org ( Jim Nunns, Jeff Rohaly) — Mon, 24 May 2010 00:00:00 EST

The Bipartisan Tax Fairness and Simplification Act of 2010 ("Wyden-Gregg," introduced as S. 3018) is a broad reform of the federal income tax system. Some provisions would also expand the Social Security payroll tax base. This paper presents the Tax Policy Center's estimates of the revenue and distributional effects of the income and payroll tax provisions in Wyden-Gregg.

Held Harmless by Higher Income Tax Rates?

info@taxpolicycenter.org ( Rachel M. Johnson, Eric Toder) — Thu, 04 Mar 2010 00:00:00 EST

In 2010, 45 percent of tax returns will either remit no federal income tax or receive a net tax refund. But this figure overstates the share of taxpayers who would be unaffected by higher income tax rates. Raising all rates by 1 percent would hold only 34 percent of tax returns harmless; others would either pay higher taxes or receive smaller net rebates.

The Opacity of Marginal Tax Rates

info@taxpolicycenter.org ( Rosanne Altshuler, Jacob Goldin) — Wed, 21 Oct 2009 00:00:00 EST

Suppose that a taxpayer earns an additional dollar of income. How much tax would she owe on that dollar? A natural way to answer this question would be to look up the taxpayers statutory tax rate - the tax rate corresponding to her tax bracket and filing status.

The Individual Alternative Minimum Tax: Historical Data and Projections, Updated October 2009

info@taxpolicycenter.org ( Katherine Lim, Jeff Rohaly) — Mon, 05 Oct 2009 00:00:00 EST

The alternative minimum tax (AMT), which originally targeted high-income taxpayers, requires annual legislation to prevent it from affecting millions of middle-income individuals each year. There are two primary reasons for the AMTs broadening impact; its parameters are not indexed for inflation and the 2001-2006 tax cuts reduced regular tax liability without changing AMT liability. In 2009, four million taxpayers will pay $33.5 billion in AMT, but without congressional action that number will rise to 27 million owing $102 billion in 2010. This paper describes the AMT and provides TPCs latest estimates of AMT coverage, revenue, and distribution.

AMT Coverage by State, 2007

info@taxpolicycenter.org ( Carol Rosenberg) — Wed, 19 Aug 2009 00:00:00 EST

Many taxpayers must calculate their federal income tax liability under two sets of rules: those applying to the regular income tax and those of the alternative minimum tax. If a taxpayer owes more tax under the alternative rules, then the difference is paid as AMT. The AMT hits people in some states harder than it does in others because state and local income and property taxes are not allowed as itemized deductions against the AMT and because income varies across states. This column discusses AMT participation rates by state.

How Big Are Total Individual Income Tax Expenditures, and Who Benefits from Them?

info@taxpolicycenter.org ( Eric Toder, Leonard E. Burman, Christopher Geissler) — Thu, 04 Dec 2008 00:00:00 EST

Analysts often add up tax expenditures to estimate an aggregate cost, but those tallies are inaccurate because they ignore interactions among provisions. We estimate that interactions raise the cost of nonbusiness tax expenditures by 5 to 8 percent, depending on whether an AMT patch is in effect. In 2007, these tax expenditures totaled about $750 billion5.5 percent of GDP. While tax expenditures benefit taxpayers in all income groups, high-income households gain more relative to income than low-income ones. Although the AMT eliminates some tax preferences, it increases overall tax expenditures because most AMT taxpayers face higher marginal tax rates.

The Impact of the Presidential Candidates' Tax Proposals on Effective Marginal Tax Rates

info@taxpolicycenter.org ( Katherine Lim, Jeff Rohaly) — Tue, 30 Sep 2008 00:00:00 EST

A taxpayer's effective marginal tax rate (EMTR) is the percentage of an additional dollar of income that would be paid in federal income tax. An individual's EMTR could affect the decision to work or save more, or avoid income tax. We use the TPC's microsimulation model of the federal tax system to calculate EMTRs under current law and under the presidential candidates' proposals. The Obama plan would lower EMTRs for the majority of households in 2009. Close to 80 percent of the population would see no change in their EMTR under Senator McCain's plan; most others would face lower rates.

An Updated Analysis of the 2008 Presidential Candidates' Tax Plans

Wed, 23 Jul 2008 00:00:00 EST

Tax and fiscal policy will loom large in the next president's domestic policy agenda. Nearly all of the tax cuts enacted since 2001 expire at the end of 2010 and the individual alternative minimum tax (AMT) threatens to ensnare tens of millions of Americans. While a permanent fix palatable to both political parties has proven elusive, both candidates have proposed major tax changes. This report describes how we performed our modeling and analysis, outlines the major tax proposals, and discusses the implications of their policies for the revenue raised, taxpayer economic activity, and the distribution of the tax burden.

An Updated Analysis of the 2008 Presidential Candidates' Tax Plans: Executive Summary

info@taxpolicycenter.org ( Roberton Williams, Howard Gleckman) — Wed, 23 Jul 2008 00:00:00 EST

Both John McCain and Barack Obama have proposed tax plans that would substantially increase the national debt over the next ten years, according to an updated analysis by the non-partisan Tax Policy Center. Compared to current law, TPC estimates the Obama plan would cut taxes by $2.8 trillion from 2009-2018. McCain would reduce taxes by nearly $4.2 trillion. Under current law, the 2001 and 2003 tax cuts would expire in 2010 and the Alternative Minimum Tax would remain in full force.

Distribution of the 2001-2006 Tax Cuts : Updated Projections, July 2008

info@taxpolicycenter.org ( Greg Leiserson, Jeff Rohaly) — Tue, 22 Jul 2008 00:00:00 EST

Since 2001, Congress has passed a major tax bill almost every year. Most have reduced taxes significantly and, since they were not accompanied by spending cuts, the resulting deficits have increased the national debt. The tax cuts total almost $2.2 trillion over ten years, and that total may be vastly understated if some or all of the cuts are extended beyond their scheduled expiration date of 2010. In addition, the cuts exacerbated the growing problem of the alternative minimum tax (AMT). Barring legislative action, more than 33 million taxpayers will fall prey to the AMT in 2010.

The Individual Alternative Minimum Tax (AMT): 12 Facts and Projections

Thu, 03 Jul 2008 00:00:00 EST

Congress originally enacted a minimum tax in 1969 to guarantee that high-income individuals paid at least a minimal amount of tax. Under todays 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.

The Individual Alternative Minimum Tax: Historical Data and Projections : Updated June 2008

info@taxpolicycenter.org ( Greg Leiserson, Jeff Rohaly) — Wed, 25 Jun 2008 00:00:00 EST

Congress enacted a minimum tax in 1969 to guarantee that high-income individuals paid at least some tax. The AMT now threatens to grow from a footnote in the tax code to a major component affecting tens of millions of taxpayers. Although most lower- and middle-income taxpayers will remain unaffected by it, policymakers need to deal with the explosive growth of the AMT from an obscure tax affecting only 20,000 filers in 1970 to one affecting more than 33 million-a third of all taxpayers-by 2010. This document provides updated estimates of AMT participation, revenue, and distribution.

A Preliminary Analysis of the 2008 Presidential Candidates' Tax Plans (Summary)

info@taxpolicycenter.org ( The Tax Policy Center) — Tue, 24 Jun 2008 00:00:00 EST

Tax and fiscal policy will loom large in the next president's domestic policy agenda. Nearly all of the tax cuts enacted since 2001 expire at the end of 2010 and the individual alternative minimum tax (AMT) threatens to ensnare tens of millions of Americans. While a permanent fix palatable to both political parties has proven elusive, both candidates have proposed major tax changes. This summary outlines our analysis of the 2008 presidential candidates' tax plans. The full length report is also available.

A Preliminary Analysis of the 2008 Presidential Candidates' Tax Plans (Full Report)

info@taxpolicycenter.org ( The Tax Policy Center) — Fri, 20 Jun 2008 00:00:00 EST

Individual Taxpayers and Federal Tax Reform : Testimony before the United States Senate Committee on Finance

info@taxpolicycenter.org ( William G. Gale) — Wed, 14 May 2008 00:00:00 EST

In the next few years, several factors will push tax issues to the forefront of policy discussions. First, under current law, almost all of the Bush Administration's tax cuts will expire at the end of 2010. A second factor is the rapid growth in the alternative minimum tax (AMT), which will increase the inequity and complexity of the tax system. A third issue is the expected increase in government spending over the next several decades. Despite these pressures on the system, tax changes are not inevitable, and achieving meaningful reformthat is, with substantial design improvementswill require strong political leadership. Gale's testimony focuses on some overarching principles that should guide tax reform efforts.

A Blueprint for Tax Reform and Health Reform : Before the Senate Committee on Finance

info@taxpolicycenter.org ( Leonard E. Burman) — Tue, 13 May 2008 00:00:00 EST

In this testimony Burman outlines a plan for tax reform that would maintain progressivity, raise enough revenues to finance the government, and dovetail with plans to provide universal access to health insurance. It would combine a value-added tax (VAT) dedicated to pay for a new universal health insurance voucher with a vastly simplified and much flatter income tax. With a new financing source for health care, income tax rates could be cut sharply-the top rates could be cut to 25 percent or less. The health care voucher would also offset the inherent regressivity of a VAT. And, under the simplified system, most Americans would not have to file income tax returns.

Tax Rates on Capital Gains and Dividends Under the AMT

info@taxpolicycenter.org ( Benjamin H. Harris, Christopher Geissler) — Mon, 03 Mar 2008 00:00:00 EST

Recent tax acts sharply lowered tax rates on long-term capital gains and dividend income. For millions of taxpayers, however, the alternative minimum tax limits the benefits from these cuts by increasing the effective marginal tax rates on capital gains and dividend income. The culprit is the phaseout of the AMT exemption.

Rangel's AMT Riddle Continues

info@taxpolicycenter.org ( C. Eugene Steuerle) — Fri, 18 Jan 2008 00:00:00 EST

In this article, C. Eugene Steuerle explores the political and budgetary pressures facing Charles Rangel, the House Ways and Means Committee Chairman, with regard to the Alternative Minimum Tax (AMT). He further analyzes various options to fix the AMT, the ramifications for Rangel, and the path taken.

The Alternative Minimum Tax : Assault on the Middle Class

info@taxpolicycenter.org ( Leonard E. Burman) — Mon, 29 Oct 2007 00:00:00 EST

In a tax code with no shortage of ironies, the alternative minimum tax (AMT) stands out. Created by Congress in 1969, it was aimed at millionaires, but relatively few millionaires pay it. It is billed as a low-rate levy, but most of its victims face higher taxes because of it. It undermines two widely lauded reforms of the income tax -- restoring both bracket creep and the marriage penalty. And though nobody favors keeping this Frankenstein alive, it will be very difficult to kill. Welcome to the tax policy twilight zone.

Distributional Effects of the Major Individual Income Tax Provisions of H.R. 3970

info@taxpolicycenter.org ( Greg Leiserson, Jeff Rohaly) — Fri, 26 Oct 2007 00:00:00 EST

On October 25, 2007, Ways and Means Committee Chairman Charles Rangel (D-NY) unveiled H.R. 3970, The Tax Reduction and Reform Act of 2007, sweeping tax reform legislation that would provide for a revenue-neutral repeal of the individual alternative minimum tax (AMT). This paper describes the proposal and provides distribution tables that analyze the impact of the major individual income tax provisions in the bill.

The Disappearing Child Care Credit

info@taxpolicycenter.org ( Elaine Maag) — Thu, 11 Oct 2007 00:00:00 EST

There are two primary tax benefits parents use to offset childcare costs. The Child and Dependent Care Tax Credit (CDCTC) provides a tax credit of up to 35 percent on up to $3,000 of expenses per child ($6,000 total), for a maximum credit of $1,050 per child ($2100 total). Or, employees can arrange with their employers to exclude up to $5,000 from their salary to pay for child care. While benefits from the CDCTC swamped those available from the exclusion in 2006; benefits from the child care credit are projected to decline dramatically, largely due to the increase in the number of taxpayers subject to the Alternative Minimum Tax (AMT) beginning in 2008.

Tax Fairness, the 2001-2006 Tax Cuts, and the AMT : Testimony before the U.S. House Committee on Ways and Means

info@taxpolicycenter.org ( Leonard E. Burman) — Thu, 06 Sep 2007 00:00:00 EST

In this testimony Burman discusses the issues of tax fairness, the 2001 to 2006 tax cuts, and the individual alternative minimum tax. Burman argues that while the federal tax system mitigates economic inequality, the recent tax cuts have disproportionately benefited those at the top, while also increasing the number of people potentially subject to the AMT. He concludes with a brief discussion of how to fix the AMT in a fiscally responsible manner.

The Individual Alternative Minimum Tax : Testimony before the U.S. Senate Committee on Finance

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 27 Jun 2007 00:00:00 EST

The AMT threatens to grow from a footnote in the tax code to a major scourge affecting tens of millions of taxpayers every year. The practice in recent years has been to patch the AMT every year or two on a temporary basis so that not too many people are affected. The latest patch expired at the end of 2006. This testimony outlines how the AMT works, whom it affects, why it demands attention, and why financing AMT repeal or reform is important. Burman lays out a number of fiscally responsible options to fix or eliminate the AMT and discusses their effects on the distribution of tax burdens, the number of AMT taxpayers, and marginal tax rates.

A Simple, Progressive Replacement for the AMT

info@taxpolicycenter.org ( Leonard E. Burman, Greg Leiserson) — Wed, 23 May 2007 00:00:00 EST

The individual alternative minimum tax (AMT) was originally an add-on tax intended to assure that high income people paid at least some tax. It has morphed and mutated over time, and now is on track to hit 23 million households in 2007. This note describes an option that would return the AMT by repealing the AMT and replacing it with an add-on tax of four percent of adjusted gross income (AGI) above $100,000 for singles and $200,000 for couples. It is a simple, approximately revenue neutral over the ten-year budget window and highly progressive.

Fixing the AMT by Raising Tax Rates

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 09 Apr 2007 00:00:00 EST

House Ways and Means Select Revenue Measures Subcommittee Chair Richard E. Neal, D-Mass., recently told reporters that fixing the alternative minimum tax was likely to involve increases in statutory tax rates rather than cutting back on preferences in the tax code. He said the former was "probably more realistic." Or is it? Raising rates at first seems easier than dealing with preferences that people want to keep. However, the simple fact is that real reform involves winners and losers. The only way to avoid that problem is to keep the status quo. But the status quo isn't tenable either: Taxpayers are increasingly dissatisfied with an AMT that continually raises their tax burdens, and in fairly arbitrary ways.

What Is Responsible for the Growth of the AMT?

info@taxpolicycenter.org ( Greg Leiserson, Jeff Rohaly) — Tue, 13 Mar 2007 00:00:00 EST

Under current law, the number of taxpayers affected by the alternative minimum tax (AMT) is projected to rise from about 4 million in 2006 to more than 23 million in 2007 and more than 32 million in 2010. On average, taxpayers affected by the AMT in 2010 will owe an additional $3,600 in taxes. Two primary culprits are responsible for this impending explosion: the failure to index the AMT for inflation and the 20012006 tax cuts. This article illustrates the growth of the AMT that would have taken place if the different incarnations of the tax that have existed since 1990 were in place today and explains the reasons for the changes in the projections under each scenario.

The Individual Alternative Minimum Tax

info@taxpolicycenter.org ( Leonard E. Burman) — Wed, 07 Mar 2007 00:00:00 EST

A precursor to the current individual alternative minimum tax (AMT) was originally enacted in 1969 to limit the amount of tax sheltering that taxpayers could pursue and to assure that high-income filers paid at least a minimal amount of tax. However, the current AMT has strayed far from those original goals and threatens to grow from a footnote in the tax code to a major component affecting tens of millions of taxpayers every year. This testimony outlines how the AMT works, whom it affects, and why it demands attention. It also discusses possible ways of reforming the AMT and why financing AMT reform or repeal is important.

The 15 Percent Rate on Capital Gains: A Casualty of the Alternative Minimum Tax

info@taxpolicycenter.org ( Greg Leiserson) — Wed, 07 Mar 2007 00:00:00 EST

Tax rate reductions on long-term capital gains and qualifying dividends were a key, highly touted component of the tax cuts passed in the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA). However, like the 20012006 tax cuts more broadly, taxpayers affected by the individual alternative minimum tax (AMT) may not pay the advertised lower rates. This article explains the interaction between the capital gains rate and the AMT and provides example tax calculations for two sample taxpayers.

Options to Fix the AMT

Fri, 19 Jan 2007 00:00:00 EST

The individual alternative minimum tax (AMT) was originally designed to limit the amount of tax sheltering and to assure that high-income filers paid at least some tax. The current AMT, however, has strayed from those original goals and under current law the tax will affect over 23 million taxpayers in 2007. This brief examines a variety of implications of AMT repeal or reform and an array of options for offsetting the revenues lost under such options. The ideal solution would be to address the AMT in the context of a complete overhaul of the income tax, such as the proposal made by the Presidents Advisory Panel on Federal Income Tax Reform.

Income Taxes and Tax Rates for Sample Families, 2006

info@taxpolicycenter.org ( Greg Leiserson) — Tue, 02 Jan 2007 00:00:00 EST

This article examines variations in tax liability and tax rates confronting typical families as income and the number of children change for tax year 2006. Although the examples represent very simple tax situations, they illustrate how hidden taxes and subsidies can make the marginal tax rate an amalgam of different effects. Often, the effective marginal tax rates and average tax rates can vary significantly from the statutory tax rates because of the phase-ins and phase-outs of deductions and credits, the individual alternative minimum tax, progressive tax schedules, and other aspects of our income tax system.

AMT Coverage by State, 2004

info@taxpolicycenter.org ( Leonard E. Burman, Carol Rosenberg) — Thu, 14 Dec 2006 00:00:00 EST

Many taxpayers must calculate their federal income tax liability under two sets of rules: those applying to the regular income tax and those of the alternative minimum tax. If a taxpayer owes more tax under the alternative rules, then the difference is paid as AMT. The AMT hits people in some states harder than it does in others because state and local income and property taxes are not allowed as itemized deduction against the AMT and because states vary based on the income of their residents. This column discusses AMT participation rates by state and the general expansion of the AMT across all the states.

The Individual Alternative Minimum Tax (AMT): 11 Key Facts and Projections

info@taxpolicycenter.org ( Leonard E. Burman, Julianna Koch, Greg Leiserson) — Fri, 01 Dec 2006 00:00:00 EST

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.

The Individual Alternative Minimum Tax : Historical Data and Projections

info@taxpolicycenter.org ( Greg Leiserson, Jeff Rohaly) — Fri, 10 Nov 2006 00:00:00 EST

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. Due to design flaw, however, the AMT threatens to grow from a footnote in the tax code to a major component affecting tens of millions of taxpayers every year. Absent a change in law, more than 30 million taxpayers will become subject to the AMT by 2010. This document presents and discusses updated estimates of AMT participation, revenue, and the distribution of AMT liability.

Tax Policy: Facts and Figures : October 2006

info@taxpolicycenter.org ( The Tax Policy Center) — Mon, 23 Oct 2006 00:00:00 EST

The early years of the 21st century have been marked by a major tax bill almost every year. This fact sheet looks at the impact of these laws on taxpayers, especially on who benefits and who doesnt, and discusses some unfinished business, including the future of the estate tax and the individual alternative minimum tax.

The Tax Reform Act of 2010

info@taxpolicycenter.org ( Leonard E. Burman) — Mon, 23 Oct 2006 00:00:00 EST

Twenty years ago, President Reagan signed an amazing piece of legislation, the Tax Reform Act of 1986. It rid the income tax of many loopholes, shut down the flourishing tax shelter industry, and made taxes simpler and fairer for tens of millions of Americans. Now we need another tax reform miracle--even more than we did in 1986. The problems of 1986--tax sheltering, tax evasion, and the belief that the tax system is unfair--exist to some extent today, but the real motivation for the Tax Reform Act of 2010 is a tax and budget tsunami about to hit our shores.

AMT Preference Items, 2002

info@taxpolicycenter.org ( Troy Kravitz, Leonard E. Burman) — Mon, 13 Mar 2006 00:00:00 EST

The largest individual AMT preference items in 2002 were state and local taxes (51 percent of all AMT preference items), personal exemptions (22 percent), and miscellaneous itemized deductions, including employee expenses and legal fees (20 percent).

Suppose They Took the AM Out of the AMT?

info@taxpolicycenter.org ( Leonard E. Burman, David Weiner) — Thu, 25 Aug 2005 00:00:00 EST

The individual alternative minimum tax (AMT) was originally intended to assure that high-income people paid at least some tax, but the AMT was poorly designed and affects more middle-income people every year. The AMT raises a lot of tax revenue, however: reforming or eliminating it could cost $500 billion over the next decade. Some suggest that the best option would be to make the AMT the regular tax system. This paper examines the implications of basing a reformed tax system on AMT rules. (A shorter version of this paper is forthcoming in the 97th Annual Conference NTA Papers and Proceedings.)

The Impact of Repealing State and Local Tax Deductibility

info@taxpolicycenter.org ( Kim Rueben) — Mon, 15 Aug 2005 00:00:00 EST

How would the elimination of state and local tax deductibility affect taxpayers and the states in which they live? While taxpayers in all 50 states claim this deduction, the benefits are concentrated in relatively few states. These are states with a disproportionate share of high-income households and relatively high state/local taxes and also states with more people subject to the AMT. Disallowing the deduction for state/local taxes would lead to Federal tax savings of $669 billion for the period 2006-2015. We estimate that the average tax increase for households would be 3.5 percent in 2005, with the largest tax increases occurring for those earning over $100,000. By 2010 the actual tax increases will be lower for many households due to the effective elimination of this deduction by the AMT. Thus for many households, elimination of the deductibility of state and local taxes is already in place as part of the current tax system.

The Expanding Reach of the Individual Alternative Minimum Tax

info@taxpolicycenter.org ( Leonard E. Burman, William G. Gale, Jeff Rohaly) — Tue, 31 May 2005 00:00:00 EST

The Expanding Reach of the Individual Alternative Minimum Tax focuses on both the original minimum tax and its successor, the individual alternative minimum tax (AMT). The minimum tax and the 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". By 2010, repealing the AMT will cost more than repealing the regular income tax. This report updates an article originally published in the Journal of Economic Perspectives to reflect tax laws passes in 2003 and 2004 and the latest economic projections.

The Expanding Reach of the Individual Alternative Minimum Tax : Testimony submitted to the United States Senate Subcommittee on Taxation and IRS Oversight of the Committee on Finance

info@taxpolicycenter.org ( Leonard E. Burman) — Mon, 23 May 2005 00:00:00 EST

Leonard Burman's testimony, submitted to the U.S. Senate Finance Subcommittee on Taxation and IRS Oversight, focuses on both the original minimum tax and its successor, the individual alternative minimum tax (AMT). Both the minimum tax and the 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." By the end of the decade, repealing the AMT will cost more than repealing the regular income tax. The testimony updates an article originally published in the Journal of Economic Perspectives to reflect tax laws passed in 2003 and 2004 and the latest economic projections.

A Unified Children's Tax Credit

info@taxpolicycenter.org ( Adam Carasso, Jeff Rohaly, C. Eugene Steuerle) — Sun, 15 May 2005 00:00:00 EST

We suggest a tax reform that would repeal the EITC, the child tax credit, and the dependent exemption and replace them with a far simpler and often more generous Unified Child Credit (UCC) by 2010. Furthermore, while the dependent exemption is not allowed under the alternative minimum tax (AMT) and nearly 30 million taxpayers will be on the AMT in 2010, the UCC would provide necessary AMT relief in lieu of the dependent exemption and can be the vehicle for bipartisan AMT reform.

The Individual Alternative Minimum Tax : A presentation to the President's Advisory Panel on Federal Tax Reform

info@taxpolicycenter.org ( Leonard E. Burman) — Thu, 03 Mar 2005 00:00:00 EST

Len Burman's PowerPoint presentation on the Individual Alternative Minimum Tax for the President's Advisory Panel on Tax Reform, March 3, 2005.

Suppose they took the AM out of the AMT?

info@taxpolicycenter.org ( Leonard E. Burman, David Weiner) — Sat, 13 Nov 2004 00:00:00 EST

The individual alternative minimum tax (AMT) was originally intended to assure that high-income people paid at least some tax, but the AMT was poorly designed and affects more and more middle-income people every year. The AMT raises a lot of tax revenue, however: reforming or eliminating it could cost $500 billion or more over the next decade. Consequently, some suggest that the best option would be to make the AMT the regular tax system, rather than an alternative. This paper examines the implications of basing a reformed tax system on the AMT rules.

The Individual Alternative Minimum Tax : A Data Update

Tue, 31 Aug 2004 00:00:00 EST

The individual alternative minimum tax (AMT) was intended to guarantee that high income people paid at least some tax, but it is poorly designed. Absent a change in law, close to 30 million taxpayers will become subject to the AMT by 2010. 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.

Fixing the Tax Mess : Prospects and Possibilities

info@taxpolicycenter.org ( The Tax Policy Center) — Tue, 13 Jul 2004 00:00:00 EST

Policymakers from across the political spectrum recognize that the federal tax system needs reform--the tax code is mind-numbingly complicated, the Alternative Minimum Tax is on its way to becoming the dominant income tax, and aggressive tax planning and sheltering have proliferated. This Urban-Brookings Tax Policy Center forum featured distinguished scholars and a leading member of the House of Representatives exchanging new ideas for improving the tax system.

An Analysis of the 2004 House Tax Cuts

info@taxpolicycenter.org ( Leonard E. Burman) — Thu, 17 Jun 2004 00:00:00 EST

The House of Representatives has passed variants on four provisions in President Bush's FY2005 Budget: marriage penalty relief (H.R. 4181), a temporary increase in the AMT exemption (H.R. 4227), an increase in the 10-percent tax bracket thresholds (H.R. 4275), and an increase in the child credit and making it available to taxpayers with higher incomes (H.R. 4359). This paper discusses the potential implications of those bills on revenues, the distribution of tax liabilities, and the economy.

Effects of Recent Fiscal Policies on Children

info@taxpolicycenter.org ( William G. Gale, Laurence J. Kotlikoff) — Mon, 07 Jun 2004 00:00:00 EST

Today's children represent the future of the century. This notion that children and future generations should have better living standards than current generations is central to universally shared views of economic progress. This article examines the effects of recent fiscal policies on children and the direct and indirect effects of one set of policies--the tax cuts and the Medicare spending increases that have been proposed and enacted since January 2001--on the long-term economic prospects of today's and tomorrow's youth.

Marriage Penalty Relief Throws Millions Onto the AMT

info@taxpolicycenter.org ( Leonard E. Burman) — Tue, 27 Apr 2004 00:00:00 EST

The House of Representatives passed a marriage penalty relief provision that would, ironically, subject three million married couples to the complex and costly alternative minimum tax (AMT). This Marketplace commentary recommends that Congress deal with the real problems in the tax code--shortage of revenue and unnecessary complexity--rather than exacerbate them.

AMT Relief in the FY2005 Budget : A Bandaid for a Hemorrhage

Wed, 04 Feb 2004 00:00:00 EST

The President's Budget, released on February 2, 2004, admits that there is a problem with the AMT, but proposes only a small and temporary fixextending through 2005 an existing temporary fix that currently expires at the end of 2004. This not only fails to resolve the problem, it also substantially reduces the apparent budgetary cost of the President's main proposals to make the 2001 and 2003 tax cuts permanent (because taxpayers on the AMT will get less benefits from the rate reductions).

Income Tax Statistics for Sample Families, 2003

info@taxpolicycenter.org ( Leonard E. Burman, Mohammed Adeel Saleem) — Mon, 19 Jan 2004 00:00:00 EST

In the U.S. federal income tax system, the effective marginal tax rates and the average tax rates vary significantly from the statutory tax rates. These differences are important since they influence the incentives to work, save and to comply with the tax system. This article measures these differences for single individuals and families with different income levels and discusses why these differences exist. Often, hidden taxes and subsidies interact, making the effective marginal tax rate an amalgam of different effects.

The AMT: Projections and Problems

info@taxpolicycenter.org ( Leonard E. Burman, William G. Gale, Jeff Rohaly) — Mon, 07 Jul 2003 00:00:00 EST

The individual alternative minimum tax (AMT) operates parallel to the regular income tax, imposing a different income definition, allowable deductions, and rate structure. The AMT grew out of a minimum tax that first took effect in 1970, due to legislation enacted in response to public outrage in the wake of testimony by Treasury Secretary Joseph W. Barr (1969) that 155 high-income households had paid no income tax in 1966. Although it has historically applied to only a very small share of taxpayers, the tax is projected to grow rapidly over the next decade, transforming it from a class tax to a mass tax. The growth of the AMT will create problems of equity, efficiency, complexity, and transparency in the tax system. It will also inevitably force policy makers to focus more attention on the issue, in part because many reform options will prove expensive. This column provides new projections of AMT taxpayers and revenues, and uses the projections to examine some broader implications for tax policy and the AMT.

The Expanding Reach of the Individual Alternative Minimum Tax

info@taxpolicycenter.org ( Leonard E. Burman, William G. Gale, Jeff Rohaly) — Tue, 01 Jul 2003 00:00:00 EST

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." 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.

Future Income Tax Cuts From the 2001 Tax Legislation

info@taxpolicycenter.org ( William G. Gale, Matthew Hall, Peter Orszag) — Mon, 17 Feb 2003 00:00:00 EST

The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 back-loaded many of its provisions. For example, EGTRRA reduces the top income tax rate from 38.6 percent currently to 37.6 percent in 2004 and 35 percent in 2006. The future income tax cuts scheduled under EGTRRA have different distributional implications from those in place as of 2003.

Fix a Real Tax Mess

info@taxpolicycenter.org ( Leonard E. Burman, William G. Gale) — Thu, 14 Nov 2002 00:00:00 EST

[Newsday] Currently affecting only a few, mostly wealthy, taxpayers, the alternative minimum tax (AMT) will expand dramatically over the next several years, visiting high tax rates and mind-numbingly complex paperwork on unsuspecting middle-class families. Prompt action could reverse those effects, but it would be expensive and neither political party has summoned the nerve to shoulder the burden. Indeed, discussion of the AMT has been absent from the political debate. In fact, last year's tax cut made the problem much worse, as would many of the proposals currently on the table.

Treasury's Upcoming Role in Formulating Tax Policy

info@taxpolicycenter.org ( C. Eugene Steuerle) — Fri, 18 Oct 2002 00:00:00 EST

Within the Executive Branch, only the Treasury Department is equipped to deal well with the political crisis surrounding the imposition of the alternative minimum tax on tens of millions of taxpayers.

The AMT: Out of Control

Wed, 18 Sep 2002 00:00:00 EST

The practice of requiring well-to-do Americans to pay a minimum tax was developed more than three decades ago. In January, 1969, then-Treasury Secretary Joseph W. Barr informed Congress that 155 individual taxpayers with income exceeding $200,000 paid no tax in 1966. The news set off a political firestorm that resulted in the creation of a minimum tax. Under current law, 36 million taxpayers will be subject to the current minimum tax by 2010. This Issues and Options paper examines how tax designed to target 155 taxpayers grew so dramatically, the economics of the AMT, and the options for reform.

The Individual AMT: Problems and Potential Solutions

Wed, 18 Sep 2002 00:00:00 EST

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.

Tax Sideshow Threatens to Become One-Ring Circus : Growth of AMT Raises Issues of Fairness, Efficiency, and Simplicity

info@taxpolicycenter.org ( Urban Institute) — Wed, 18 Sep 2002 00:00:00 EST

The descendant of a 1969 tax designed to prevent 155 wealthy people from escaping federal tax liability will affect 36 million, mostly middle-class taxpayers by 2010, say researchers from the nonpartisan Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution. [Read the report and the companion policy brief]

Individual AMT: Ten Facts and Projections, The

Wed, 18 Sep 2002 00:00:00 EST

These facts and projections highlight the increasing role of the AMT, and the problems it poses. The facts are based on the discussion paper "The Individual AMT: Problems and Potential Solutions." The Tax Reform Act of 1969 created a minimum tax designed to ensure that individuals with high incomes did not take what was deemed undue advantage of tax laws to avoid federal income tax liability. The individual AMT is now on the verge of switching from a "class" tax to a "mass" tax. The trends are troubling because the AMT is notoriously complex, its effects on efficiency and equity are questionable, and its underlying purpose is controversial.

AMT Slide Show

Wed, 18 Sep 2002 00:00:00 EST

The alternative minimum tax was created in 1969 to ensure that high-income taxpayers did not exploit tax laws to reduce or eliminate their federal income tax. By 2010, it is expected to affect 36 million taxpayers, particularly upper-middle-class families with children. This slide show provides an overview and history of the tax; Tax Policy Center projections; an examination of equity, efficiency, and complexity issues; and reform options. The show is based on the discussion paper "The Individual AMT: Problems and Potential Solutions."

By 2008, the AMT Will Cost More to Repeal Than the Regular Income Tax

info@taxpolicycenter.org ( William G. Gale, Leonard E. Burman, Jeff Rohaly) — Mon, 16 Sep 2002 00:00:00 EST

Taxpayers pay alternative minimum tax (AMT) if their AMT liability exceeds their regular income tax. Originally targeted at a few high-income households who paid no federal income tax, this class tax is about to become a mass tax. The projected expansion occurs because the AMT is not indexed for inflation and because last year's tax cut steadily pares regular income tax obligations without providing significant and sustained AMT relief. The increases are troubling because the AMT is notoriously complex and has dubious effects on equity and efficiency.

The 2001 Tax Cut: One Year Later (Transcript)

info@taxpolicycenter.org ( Urban Institute) — Tue, 04 Jun 2002 00:00:00 EST

[First Tuesdays Transcript] Moderated by Jodie Allen of U.S. News & World Report, this Urban Institute First Tuesdays Forum takes a look at the 2001 Tax Cut also know as the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) one year after it's inception. The panel was made up of the co-directors of the Urban Institute and Brookings Institution's joint Tax Policy Center, Len Burman and Bill Gale. Joining them on the panel were Eric Engen of AEI and former Congressman William Frenzel.

The 2001 Tax Cut: One Year Later

info@taxpolicycenter.org ( Urban Institute) — Tue, 04 Jun 2002 00:00:00 EST

June's First Tuesday forum looked at the 2001 tax cut from the vantage point of one year later. Panelists examined the features and consequences of EGTRRA; discussed the effects that tax cuts have on individuals, the economy, productivity, and government spending; analyzed the explosive growth of the Alternative Minimum Tax (AMT) and considered alternatives to it; and explored the political considerations of tax cuts.

Tax Simplification : Testimony before the United States' House of Representatives Subcommittee on Oversight Committee on Ways and Means

info@taxpolicycenter.org ( C. Eugene Steuerle) — Tue, 17 Jul 2001 00:00:00 EST

The 2001 tax act was only one in a long series of tax laws complicating an already byzantine tax system. Ever the bridesmaid, simplification seems never to get the attention it deserves, no matter which political party is in power—mainly because broader agendas are always being pursued.

Moving Beyond the Fight Over the Alternative Minimum Tax

info@taxpolicycenter.org ( C. Eugene Steuerle) — Fri, 15 Jun 2001 00:00:00 EST

The Alternative Minimum Tax albatross just keeps getting bigger and bigger and neither political party yet wants to take responsibility. Fixes are possible, but they require compromise over articles of faith for both parties.

The Impact of Complexity in the Tax Code on Individual Taxpayers and Small Businesses : Testimony before the House Committee on Ways and Means, Subcommittee on Oversight

info@taxpolicycenter.org ( C. Eugene Steuerle) — Tue, 25 May 1999 00:00:00 EST

There are many items in the tax law that add significant complexity with little gain in some other area like equity or efficiency. Almost no one would introduce many provisions now in current law, if designing a Code from scratch. Once there, however, these complexities are hard to remove.

The Crazy Politics of the Alternative Minimum Tax

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 22 Mar 1999 00:00:00 EST

Senior Fellow Eugene Steuerle examines tax reform and the Alternative Minimum Tax (AMT). He suggests a solution: Simply eliminate or cut the AMT and then replace it with more direct taxes on the income classes that benefit from the AMT tax cut. He concludes, however, that neither political party, it seems, is ready for a more sweeping type of reform. The net result is that both parties are put in the position of favoring stealth taxes over explicit taxes. Meanwhile, the AMT remains and grows in size every year.

The Individual AMT: More Than a Small Fix Is Needed

info@taxpolicycenter.org ( C. Eugene Steuerle) — Mon, 30 Nov 1998 00:00:00 EST

Senior Fellow Eugene Steuerle examines the factors that have made the Alternative Minimum Tax (AMT) one of the more complicating influences on the tax code. He concludes that the individual AMT is in need of a good fix or outright elimination, and that simply indexing it is not enough.

Big, Big Postcard

info@taxpolicycenter.org ( Leonard E. Burman) — Mon, 06 Oct 1997 00:00:00 EST

The Congressional leadership that crafted the Taxpayer Relief Act of 1997 wants the tax system to be so simple that taxpayers can fill out a tax form on a postcard. Judging by some of the choices they made in the new law (with lots of help from the President), they had in mind a postcard the size of a billboard.