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1 Gerald Prante, AMT Taxpayers Have Benefited Greatly from Bush Tax Cuts 1 (2007)

handle is hein.taxfoundation/ffigxz0001 and id is 1 raw text is: FOUNDATION May 31, 2007 AMT Taxpayers Have Benefited Greatly from Bush Tax Cuts by Gerald Prante Fiscal Fact No. 86 Over the past few years, the growth of the Alternative Minimum Tax (AMT) has received more attention than any other federal tax issue. Many politicians have proclaimed that the AMT foists an unfair financial burden on middle-class taxpayers who allegedly were not helped much by the Bush tax cuts. This Fiscal Fact shows that, on the contrary, current AMT filers benefited enormously from the Bush tax cuts. IRS data show that most people filing the AMT now earn between $100,000 and $500,000. If the Bush tax cuts and the AMT disappeared today, nearly every one of those taxpayers would pay more to Uncle Sam, often thousands of dollars more. In fact, average AMT taxpayers in 2007 under current law will pay nearly $2,800 less, even counting their AMT payments, than they would pay if the Bush tax cuts had never happened. On the other hand, tax returns not scheduled to be hit by AMT in 2007 will save an average of $989 from the tax cuts this year. The Alternative Minimum Tax is a parallel tax system that requires taxpayers to re- calculate what they owe, using different rules and rates. These AMT rules include a generous initial exemption yet allow fewer deductions than the regular code. The AMT is closer to a flat tax, with only two tax rates, 26 and 28 percent. Once somebody calculates what he owes under this system, he compares it to what he has calculated with the regular tax rules. The taxpayer pays whichever is larger, and if it's the AMT, then he's officially an AMT filer.' (For more on the AMT, see Tax Foundation Special Report, No. 155, May 2007.) The Bush tax cuts are scheduled to push more people into AMT in 2007 because the cuts lowered the ordinary rates while doing little for the AMT system. Only annual patches- dramatic hikes in the exemption level-have prevented the number of AMT filers from soaring, and while such a patch is likely again this year, the political rhetoric regarding who these AMT taxpayers are needs to be put in proper perspective. 2 Even though the Bush tax cuts have pushed more people into this parallel tax system, the AMT certainly does not take back all the tax savings that the tax cuts conferred. On the

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