NCPA - National Center for Policy Analysis

More Taxpayers Face Alternative Minimum Tax

January 10, 2003

As originally conceived, the alternative minimum tax (A.M.T.) was meant to ensure that all Americans -- particularly those with the highest incomes -- pay at least some federal taxes. But with each passing year the alternative minimum tax ensnares more taxpayers, even middle-income Americans for whom it was never supposed to apply. And that trend will accelerate greatly between now and 2010.

Tax specialists say President Bush's new tax plan provides only moderate and temporary relief from the alternative minimum.

  • CCH, a major publisher of tax books, says the White House "proposal does not address the underlying problems that will continue to subject an increasingly larger number of taxpayers to the A.M.T."
  • CCH also noted that even minor relief would last only through next year.
  • For example, while only 3 percent of taxpayers with adjusted gross incomes of $75,000 to $100,000 were subjected to the A.M.T. in 2002, the proportion will rise to 79 percent in 2010.
  • The tax could start to hit one-child families with incomes as low as $71,000 by 2006 -- and couples with two incomes and two or more children would soon see their credits for child care and college education expenses either reduced or wiped out, absent any change in the law.

The Treasury Department's senior tax policy official, Pam Olson, says the administration plans to propose a solution to the problem at the end of 2005.

Source: David Cay Johnston, "Alternative Tax Looms Large Despite Plans for Other Cuts," New York Times, January 10, 2003.

 

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