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The Alternative Minimum Tax and Effective Marginal Tax Rates

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  • Feenberg, Daniel R.
  • Poterba, James M.

Abstract

This paper examines how the Alternative Minimum Tax (AMT) affects the weighted average marginal tax rates that apply to various components of taxable income and the subsidy rates on various income tax deductions. It also considers how several AMT reform proposals would affect the number of AMT taxpayers, total AMT liability, and weighted average marginal tax rates. On average, the AMT has only a modest impact on the weighted average marginal tax rates for most sources of income although some taxpayers face substantially higher tax rates, and others substantially lower rates, as a result of the AMT. Our projections show that modest increases in the AMT exclusion level have substantial effects on the number of AMT taxpayers, and that indexing the AMT parameters would reduce the number of AMT payers in 2010 by more than 60 percent.

Suggested Citation

  • Feenberg, Daniel R. & Poterba, James M., 2004. "The Alternative Minimum Tax and Effective Marginal Tax Rates," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(2), pages 407-427, June.
    • Handle: RePEc:ntj:journl:v:57:y:2004:i:2:p:407-27
    DOI: 10.17310/ntj.2004.2S.03
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    References listed on IDEAS

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    1. Harvey, Robert P. & Tempalski, Jerry, 1997. "The Individual AMT: Why It Matters," National Tax Journal, National Tax Association;National Tax Journal, vol. 50(3), pages 453-473, September.
    2. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
    3. Harvey, Robert P. & Tempalski, Jerry, 1997. "The Individual AMT: Why it Matters," National Tax Journal, National Tax Association, vol. 50(3), pages 453-73, September.
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    Citations

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    Cited by:

    1. David Altig & Alan J. Auerbach & Laurence J. Kotlikoff & Elias Ilin & Victor Ye, 2020. "The Marginal Net Taxation of Americans’ Labor Supply," NBER Working Papers 27164, National Bureau of Economic Research, Inc.
    2. Gavin, William T. & Kydland, Finn E. & Pakko, Michael R., 2007. "Monetary policy, taxes, and the business cycle," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1587-1611, September.
    3. Laurence J. Kotlikoff & David Rapson, 2007. "Does It Pay, at the Margin, to Work and Save? Measuring Effective Marginal Taxes on Americans' Labor Supply and Saving," NBER Chapters, in: Tax Policy and the Economy, Volume 21, pages 83-144, National Bureau of Economic Research, Inc.
    4. Caren Sureth & Ralf Maiterth, 2006. "Wealth Tax As Alternative Minimum Tax ? - the Impact of Minimum Taxation on Business Structure and Strategy -," EcoMod2006 272100093, EcoMod.
    5. Rainer Niemann, 2006. "Wirkungen der Abschnittsbesteuerung auf internationale Investitions- und Repatriierungsentscheidungen," Schmalenbach Journal of Business Research, Springer, vol. 58(7), pages 928-957, November.
    6. Makoto Nakajima, 2010. "Optimal capital income taxation with housing," Working Papers 10-11, Federal Reserve Bank of Philadelphia.
    7. Niemann, Rainer, 2004. "Entscheidungswirkungen von Verlustverrechnungsbeschränkungen bei der Steuerplanung grenzüberschreitender Investitionen," Tübinger Diskussionsbeiträge 276, University of Tübingen, School of Business and Economics.
    8. William Gavin & Benjamin Keen & Finn Kydland, 2015. "Monetary Policy, the Tax Code, and the Real Effects of Energy Shocks," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 694-707, July.
    9. Rosanne Altshuler & Robert D. Dietz, 2008. "Tax Expenditure Estimation and Reporting: A Critical Review," NBER Working Papers 14263, National Bureau of Economic Research, Inc.
    10. Francis A. Longstaff, 2009. "Municipal Debt and Marginal Tax Rates: Is there a Tax Premium in Asset Prices?," NBER Working Papers 14687, National Bureau of Economic Research, Inc.
    11. Nakajima, Makoto, 2020. "Capital income taxation with housing," Journal of Economic Dynamics and Control, Elsevier, vol. 115(C).
    12. Rainer Niemann, 2004. "Asymmetric Taxation and Cross-Border Investment Decisions," CESifo Working Paper Series 1219, CESifo.
    13. Caren Sureth & Ralf Maiterth, 2008. "The impact of minimum taxation by an imputable wealth tax on capital budgeting and business strategy of German companies," Review of Managerial Science, Springer, vol. 2(2), pages 81-110, July.
    14. Rosanne Altshuler & Robert Dietz, 2008. "Reconsidering Tax Expenditure Estimation: Challenges And Reforms," Departmental Working Papers 200804, Rutgers University, Department of Economics.
    15. Finn E. Kydland & Fei Mao & William T. Gavin, 2011. "Monetary Policy, the Tax Code, and Energy Price Shocks," 2011 Meeting Papers 1160, Society for Economic Dynamics.
    16. William Gale & Peter Orszag, 2005. "Economic Effects of Making the 2001 and 2003 Tax Cuts Permanent," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(2), pages 193-232, March.

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    More about this item

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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