NCPA - National Center for Policy Analysis

Corporate Alternative Minimum Tax

October 15, 2001

On October 5, George W. Bush said Congress should "eliminate" the corporate alternative minimum tax (AMT) in order to encourage capital investment by corporations. The AMT actually raises no net revenue for the federal government -- yet imposes severe economic costs that inhibit investment.

The AMT is like a completely separate federal tax system parallel to the corporate income tax. Companies pay whichever yields a higher tax.

A quirk of the AMT is that its liabilities rise during recessions because accumulated depreciation from past investments triggers an AMT liability for many companies when their profits fall due to lower sales.

Thus gross AMT receipts rose from $3.5 billion in 1989 to $8.1 billion in the recession year of 1990. But since the law also allows corporations a credit for past AMT payments in years when they have no AMT liability, these credits now exceed the gross AMT, meaning that on net the federal government loses revenue from the AMT.

  • Since 1995, AMT credits have exceeded gross receipts each year, meaning that the government had negative AMT revenue.
  • Between 1995 and 1998, it took in $2 billion less revenue than if there were no corporate AMT at all.
  • The last year the government got positive net revenue was 1994, when it got just $1.3 billion, less than 1 percent of corporate tax receipts and .01 percent of all federal revenues.

Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, October 15, 2001.


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