When Congress discovered that 155 wealthy Americans were paying no federal income taxes, it passed the alternative minimum tax (AMT) in 1969. Today, a burgeoning number of middle-class Americans are being caught in its snares.

The AMT applies a 26 percent or 28 percent tax rate to total income for those taxpayers who would have $45,000 or more in exemptions and deductions under the personal income tax. Others do not pay the AMT itself, but cannot take full tax breaks under the regular system without running up against AMT limits.

• Two million taxpayers will be subject to it this tax year.

• About half of them have incomes of $30,000 to $100,000.

• A decade from now, 8.8 million taxpayers will have to pay the AMT and another 2.8 million will not receive the full value of deductions available to other taxpayers, estimates Congress' Joint Committee on Taxation.

• And the number of households making $30,000 to $50,000 who must pay the AMT will triple in the coming decade, Treasury Department economists Robert Rebelein and Jerry Tempalski calculated recently.

Experts say the middle class has been drawn into the realm of alternative minimum taxes due to the 1986 tax reform act, which required treating many exemptions like tax shelters for the wealthy, and inflation. Measures aimed at modest income taxpayers, like the $500 child tax credit passed last year, will subject even more of them to the AMT.

The AMT generates $6.6 billion in federal revenues -- less than 1 percent of all individual income tax revenue.

Source: David Cay Johnston, "Funny, They Don't Look Like Fat Cats," New York Times, January 10, 1999.