NCPA - National Center for Policy Analysis

Americans Increasingly Falling Victim to the "Stealth Tax"

February 18, 2002

The alternative minimum tax was originally put in place in 1969 to assure that a handful of upper-income Americans -- 155 of them, to be exact -- paid some kind of federal income tax that year.

But since then, rapidly growing numbers of Americans have unhappily discovered that the tax has sneaked up on them -- hence the description "stealth tax" -- and that they suddenly owe much more to the Internal Revenue Service than they thought.

  • The AMT traps people by reducing breaks allowed in the regular tax system and then taxing the remaining income at either 26 percent or 28 percent.
  • The alternative tax will affect 2.7 million this year -- double the number just two years ago.
  • In 2010, it will affect 35 million taxpayers -- including most families with three or more children and incomes of $100,000 or more.
  • Those affected will lose two-thirds -- or $88 billion -- of their Bush tax cuts in 2010.

As the number of taxpayers who get clobbered by the AMT grows each year, so will the pressure on Congress to repeal it.

But the trouble is that the cost to the government of repeal grows with each year. Treasury Department economists estimate that the 10-year cost of repeal now stands at $619 billion -- and is rising.

Source: David Cay Johnston, "A 'Stealth Tax' Is Creeping Up on Growing Numbers of Americans," New York Times, February 17, 2002


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