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Policy Watch: The Expanding Reach of the Individual Alternative Minimum Tax

Author

Listed:
  • Leonard E. Burman
  • William G. Gale
  • Jeffrey Rohaly

Abstract

The individual alternative minimum tax (AMT) was designed in 1970 to apply reduce aggressive tax sheltering, but under current law will grow to cover tens of millions of households in the next decade. The growth occurs because the AMT is not indexed for inflation and the 2001 tax cut reduced regular income taxes but not the AMT. AMT growth is troubling because the tax has questionable effects on equity and efficiency and is inordinately complex. This paper describes the AMT, discusses economic issues related to the alternative minimum tax, and examines options for reform.

Suggested Citation

  • Leonard E. Burman & William G. Gale & Jeffrey Rohaly, 2003. "Policy Watch: The Expanding Reach of the Individual Alternative Minimum Tax," Journal of Economic Perspectives, American Economic Association, vol. 17(2), pages 173-186, Spring.
  • Handle: RePEc:aea:jecper:v:17:y:2003:i:2:p:173-186
    Note: DOI: 10.1257/089533003765888494
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    References listed on IDEAS

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    1. Gruber, Jon & Saez, Emmanuel, 2002. "The elasticity of taxable income: evidence and implications," Journal of Public Economics, Elsevier, vol. 84(1), pages 1-32, April.
    2. Kiefer, Donald W. & Carroll, Robert & Holtzblatt, Janet & Lerman, Allen, 2002. "The Economic Growth and Tax Relief Reconciliation Act of 2001: Overview and Assessment of Effects on Taxpayers," National Tax Journal, National Tax Association;National Tax Journal, vol. 55(1), pages 89-117, March.
    3. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    4. Andrew A. Samwick, 1996. "Tax Shelters and Passive Losses after the Tax Reform Act of 1986," NBER Chapters,in: Empirical Foundations of Household Taxation, pages 193-233 National Bureau of Economic Research, Inc.
    5. Slemrod, Joel, 1990. "Optimal Taxation and Optimal Tax Systems," Journal of Economic Perspectives, American Economic Association, vol. 4(1), pages 157-178, Winter.
    6. Kiefer, Donald W. & Carroll, Robert & Holtzblatt, Janet & Lerman, Allen, 2002. "The Economic Growth and Tax Relief Reconciliation Act of 2001: Overview and Assessment of Effects on Taxpayers," National Tax Journal, National Tax Association, vol. 55(N. 1), pages 89-117, March.
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    Cited by:

    1. Niemann, Rainer, 2004. "Entscheidungswirkungen von Verlustverrechnungsbeschränkungen bei der Steuerplanung grenzüberschreitender Investitionen," Tübinger Diskussionsbeiträge 276, University of Tübingen, School of Business and Economics.
    2. Rainer Niemann, 2004. "Asymmetric Taxation and Cross-Border Investment Decisions," CESifo Working Paper Series 1219, CESifo Group Munich.
    3. 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.
    4. Caren Sureth & Ralf Maiterth, "undated". "Wealth Tax As Alternative Minimum Tax ? - the Impact of Minimum Taxation on Business Structure and Strategy -," EcoMod2006 272100093, EcoMod.
    5. Auerbach, Alan J., 2006. "The U.S. Tax System in International Perspective: A Review of the 2006 Economic Report of the PresidentiÌ s Tax Chapter," Berkeley Olin Program in Law & Economics, Working Paper Series qt23b9n6bp, Berkeley Olin Program in Law & Economics.
    6. Michael J. Graetz, 2007. "Tax Reform Unraveling," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 69-90, Winter.

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