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Letter to the Honorable Kent Conrad: Long-Term Effects of Indexing the Alternative Minimum Tax and Extending the Tax Reductions of 2001 and 2003 [i] (July 2008)

handle is hein.congrec/cbo8642 and id is 1 raw text is: CONGPESS ONAL BUDGET OFFICE Peter R. Orszaig, Director LI S. Congress VV IShinrtn, DJC 2'0515 July 17, 2008 Honorable Kent Conrad Chairman Committee on the Budget United States Senate Washington, DC 20510 Dear Mr. Chairman: Over the next few years, the alternative minimum tax (AM/T) will affect an increasing number of taxpayers and generate a growing share of income tax revenues. In addi- tion, personal income taxes are scheduled to increase when the tax reductions origi- nally enacted in the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) expire after 20 10. Legislation to limit the growth of the AMT or to extend the tax reductions beyond 2010 would increase federal budget deficits and federal debt, relative to those that would occur under current law, unless offsetting changes in federal taxes or spending were also enacted. In response to your letter of July 8, 2008, the Congressional Budget Office (CBO) has estimated the long-term fiscal impact of two proposals you described (see the attach- ment). The first would limit the impact of the AMT by indexing it for inflation beginning in 2008. The second would make that change and permanently extend the personal income tax provisions of EGTRRA and JGTRRA that otherwise expire after 20 10. Per your request, CBO compared the effects on the budget and the economy of financing those two policies with additional borrowing instead of financing them immediately via changes in other policies. In keeping with CBO's mandate to provide objective, impartial analysis, this report makes no policy recommendations. 0w bogV

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