25 Million Additional Taxpayers May Face the Dreaded AMT

25 MILLION AMT ADDITIONAL TAXPAYERS @ MAY FACE THE DREADED THE ALTERNATIVE MINIMUM TAX AMT was originally enacted to guarantee that high-income individuals paid a minimum CURRENT NUMBER OF AMT PAYERS: 4 MILLION amount of taxes. After calculating their regular income tax, middle- and upper-income POTENTIAL NUMBER OF AMT PAYERS IF CURRENT LEGISLATION IS NOT EXTENDED FOR 2011: taxpayers must add a number of "preference items" to their taxable income, subtract a special AMT exemption, and recalculate their tax according to the AMT tax schedule 25-30 MILLION THE ORIGINS OF THE ALTERNATIVE MINIMUM TAX 1970 REVENUE THE MILLIONAIRE'S TAX: AMT was introduced by the Tax Reform Act of 1969. It was originally intended to target 155 high-income households that had been eligible for many loopholes and ended up paying little to no $120 MILLION .14% of income tax income tax. 50% 100% 1979 REVENUE 1979 REPEALED ADD-ON TAX $870 MILLION Congress enacted the modern ATM in 1979 to operate alongside the “Millionaire's Tax". In 1983, Congress repealed the add-on tax. 1986 $6.7 BILLION The "AMT creep" into middle class taxpayers is due to the fact that AMT was not indexed for inflation. REVENUE 1986 1985 THE TAX REFORM ACT $6.7 BILLION This act eliminated much sheltering activity and eliminated the partial exclusion of capital gains which accounted for almost 85% of AMT preferences in 1985. AMT revenue initially dropped but continued to rise steadily since it was not indexed by inflation. AFTER TAX REFORM ACT 1987 $1.7 BILLION 2001-2006 TAX CUTS These taxes temporarily increased the ATM exemption and allowed certain nonrefundable credits to be 2001 used regardless of ATM liability. SOURCES: NYTIMES I TAX POLICY CENTER OFFICE OF TAX ANALYSIS DOT TurboTax Choose Easy.