Number: RS21817
Title: The Alternative Minimum Tax (AMT): Income Entry Points and "Take Back" Effects
Authors: Steven Maguire, Government and Finance Division 
Abstract: The alternative minimum tax for individuals (AMT) was originally enacted to ensure that high-income taxpayers paid a fair share of the federal income tax. However, the recent reductions in regular income taxes coupled with the lack of indexation of the AMT has greatly expanded the potential impact of this tax. Temporary increases in the AMT exemption amounts expired at the end of 2007. If this occurs, then the number of taxpayers subject to the AMT will jump from roughly 5 million in 2007 to 26 million in 2008. Taxpayers filing joint returns with no dependents will be subject to the AMT starting at income levels of $74,660. Large families will be subject to the AMT at income levels as low as $55,568. In addition, for many taxpayers, the AMT will "take back" much of the reductions in the regular income tax earlier this decade. The estimated combined revenue loss from extending recent reductions in the regular individual income tax and extending the higher AMT exemption amounts (indexed for inflation) and allowing personal credits (the "patch") would be significant. These two policy options together along with increased debt service would reduce federal tax revenues by more than $4.3 trillion between 2009 and 2018.
Pages: 6
Date: March 5, 2008