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The Alternative Minimum Tax (AMT): Income Entry Points and "Take Back" Effects, March 5, 2008 1 (March 5, 2008)

handle is hein.tera/crstax0007 and id is 1 raw text is: Order Code RS21817 Updated March 5, 2008 CRS Repo for Congress The Alternative Minimum Tax (AMT): Income Entry Points and Take Back Effects Steven Maguire Specialist in Public Finance Government and Finance Division Summary The alternative minimum tax for individuals (AMT) was originally enacted to ensure that high-income taxpayers paid a fair share of the federal income tax. However, the recent reductions in regular income taxes coupled with the lack of indexation of the AMT has greatly expanded the potential impact of this tax. Temporary increases in the AMT exemption amounts expired at the end of 2007. If this occurs, then the number of taxpayers subject to the AMT will jump from roughly 5 million in 2007 to 26 million in 2008. Taxpayers filing joint returns with no dependents will be subject to the AMT starting at income levels of $74,660. Large families will be subject to the AMT at income levels as low as $55,568. In addition, for many taxpayers, the AMT will take back much of the reductions in the regular income tax earlier this decade. The estimated combined revenue loss from extending recent reductions in the regular individual income tax and extending the higher AMT exemption amounts (indexed for inflation) and allowing personal credits (the patch) would be significant. These two policy options together along with increased debt service would reduce federal tax revenues by more than $4.3 trillion between 2009 and 2018. This report will be updated as legislative action warrants. The alternative minimum tax for individuals (AMT) was originally designed to prevent a small number of high-income taxpayers from escaping their fair share of income taxes through the use of special preferences under the regular income tax.1 In the absence of legislative action, however, the number of taxpayers falling under the AMT is going to increase dramatically over the next few years. For a detailed history and explanation of the AMT see CRS Report RL30149, The Alternative Minimum Tax for Individuals, by Steven Maguire. Congressional Research Service The Library of Congress Prepared for Members and Committees of Congress

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