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The Alternative Minimum Tax for Individuals: Legislative Initiatives in the 109th Congress, December 28, 2006 1 (December 28, 2006)

handle is hein.tera/crstax0019 and id is 1 raw text is: Order Code RS22100 Updated December 28, 2006 ACRS Report for Congress The Alternative Minimum Tax for Individuals: Legislative Initiatives in the 109t' Congress Gregg A. Esenwein Specialist in Public Finance Government and Finance Division Summary The alternative minimum tax (AMT) for individuals was originally enacted to ensure that all taxpayers, especially high-income taxpayers, paid at least a minimum amount of federal taxes. However, the AMT is not indexed for inflation, and this factor, combined with the recent reductions in the regular income tax, has greatly expanded the potential impact of the AMT. Temporary provisions intended to mitigate the effects of the AMT will expire at the end of 2006. As a result, the number of taxpayers subject to the AMT will increase from 3.6 million in 2005 to 23 million in 2007. The Congressional Budget Office estimates that extending AMT tax relief would reduce federal revenue by $282 billion over the period FY2007 through FY2011. In May 2006, Congress passed the Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA). This act increased the basic AMT exemption to $62,550 for joint returns and $42,500 for unmarried taxpayers. It also extended the provision allowing certain personal tax credits to offset AMT liability. These two changes are only effective through 2006. This report will not be updated. The alternative minimum tax (AMT) for individuals was originally enacted to ensure that all taxpayers, especially high-income taxpayers, paid at least a minimum amount of federal taxes.' However, absent legislative action, there will be a significant increase in the number of middle- to upper-middle-income taxpayers affected by the AMT in the near future. In 2005, about 3.6 million taxpayers were subject to the AMT, but by 2007, up to 23 million taxpayers could be subject to the AMT. 1There is also a corporate minimum tax, but it is not addressed in this report. Congressional Research Service -f-! The Library of Congress Prepared for Members and Commitees of Congress

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