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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.

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Bibliographic Info

Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 57 (2004)
Issue (Month): 2 (June)
Pages: 407-27

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Handle: RePEc:ntj:journl:v:57:y:2004:i:2:p:407-27

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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 Association, vol. 50(3), pages 453-73, September.
  2. Daniel Feenberg & Elisabeth Coutts, 1993. "An introduction to the TAXSIM model," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 12(1), pages 189-194.
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Cited by:
  1. Michael R. Pakko & William T. Gavin & Finn E. Kydland, 2005. "Monetary Policy, Taxes, and the Business Cycle," 2005 Meeting Papers, Society for Economic Dynamics 265, Society for Economic Dynamics.
  2. Laurence J. Kotlikoff & David Rapson, 2006. "Does It Pay, At The Margin, To Work And Save? -- Measuring Effective Marginal Taxes On Americans' Labor Supply And Saving," Boston University - Department of Economics - Working Papers Series, Boston University - Department of Economics WP2006-048, Boston University - Department of Economics.
  3. William Gale & Peter Orszag, 2005. "Economic Effects of Making the 2001 and 2003 Tax Cuts Permanent," International Tax and Public Finance, Springer, Springer, vol. 12(2), pages 193-232, March.
  4. 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.
  5. Finn E. Kydland & Fei Mao & William T. Gavin, 2011. "Monetary Policy, the Tax Code, and Energy Price Shocks," 2011 Meeting Papers, Society for Economic Dynamics 1160, Society for Economic Dynamics.
  6. William T. Gavin & Benjamin D. Keen & Finn E. Kydland, 2013. "Monetary policy, the tax code, and the real effects of energy shocks," Working Papers, Federal Reserve Bank of Dallas 1304, Federal Reserve Bank of Dallas.
  7. Niemann, Rainer, 2004. "Entscheidungswirkungen von Verlustverrechnungsbeschränkungen bei der Steuerplanung grenzüberschreitender Investitionen," Tübinger Diskussionsbeiträge, University of Tübingen, School of Business and Economics 276, University of Tübingen, School of Business and Economics.
  8. Rosanne Altshuler & Robert D. Dietz, 2008. "Tax Expenditure Estimation and Reporting: A Critical Review," NBER Working Papers 14263, National Bureau of Economic Research, Inc.
  9. 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, Springer, vol. 2(2), pages 81-110, July.
  10. Makoto Nakajima, 2010. "Optimal capital income taxation with housing," Working Papers 10-11, Federal Reserve Bank of Philadelphia.
  11. Rosanne Altshuler & Robert Dietz, 2008. "Reconsidering Tax Expenditure Estimation: Challenges And Reforms," Departmental Working Papers, Rutgers University, Department of Economics 200804, Rutgers University, Department of Economics.
  12. Rainer Niemann, 2004. "Asymmetric Taxation and Cross-Border Investment Decisions," CESifo Working Paper Series, CESifo Group Munich 1219, CESifo Group Munich.

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