The corporate Alternative Minimum Tax (AMT) established in 1986 has achieved the goal of distributing tax collections more evenly among corporations and industries and ensuring that profitable corporations not avoid significant tax liability through exclusions, deductions and credits.

However, the act establishing the AMT also:

• Resulted in reduced total capital investment in the economy because of the elimination of incentives.

• Increases resources wasted on tax compliance efforts because the complexity of the act requires more record keeping and complicates business investment planning.

• Has the perverse effect of raising a firm's effective tax rate during economic slowdowns, when the taxpayer experiences declining profits or even losses.

Source: Chris R. Edwards, "A Primer on the Corporate Alternative Minimum Tax," Special Report No. 30, March 1994, Tax Foundation, 1250 H Street, NW, Suite 750, Washington, DC 20005, (202) 783-2760.

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