AMT Hits Middle Class, Not Just the Wealthy
The individual Alternative Minimum Tax is a remarkably complex provision in a tax code not known for its clarity. It requires taxpayers to calculate their taxes twice, and then pay the larger amount. While originally designed to ensure that wealthy Americans pay a reasonable level of their income in taxes, because of the combined effects of inflation and individual rate cuts, the AMT is beginning to reach the middle class.
It is now estimated that the number of taxpayers subject to the AMT will increase from about 1.8 million in 2001 to more than 41 million by 2013. (The Alternative Minimum Tax From Individuals, CRS Report for Congress, by Gregg Esenwein, Jan. 15, 2004.)
Households with income of less than $100,000 will account for 52 percent of AMT taxpayers in 2010, up from 9 percent today. They will account for 23 percent of AMT revenue, compared with just 5 percent in 2003. In 2010, the tax will affect 37 percent of households with income between $50,000 and $75,000 and 73 percent of households with income between $75,000 and $100,000 (compared to about 1 percent for each group in 2002). (The AMT: Projections and Problems, by Leonard Burman, William Gale and Jeff Rohaly, July 7, 2003.)
As time goes on, the problem will only become more difficult to fix. Some projections suggest that by 2008, it will be less costly to repeal the regular income tax than to repeal the AMT.
