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 the underlying purpose of the AMT 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.
ASJC Scopus subject areas
- Economics and Econometrics