The Alternative Minimum Tax and Effective Marginal Tax Rates
This paper examines the impact of the Alternative Minimum Tax on the weighted average marginal tax rates that apply to various components of taxable income. It also considers the impact of several AMT reform proposals on the number of AMT taxpayers, the total revenue collected from the AMT, and the weighted average marginal tax rates that apply to wages, capital income, and deductions such as state and local taxes and charitable gifts. The paper uses the NBER TAXSIM model to project federal personal income tax liabilities as well as AMT liabilities between 2003 and 2013. The AMT has only a modest impact on the average marginal tax rates for most sources of income because some AMT taxpayers face higher marginal tax rates, and others lower tax rates, as a result of the tax. The 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 sixty percent. These changes would also reduce the AMT's impact on average marginal tax rates.
|Date of creation:||Nov 2003|
|Date of revision:|
|Publication status:||published as Feenberg, Daniel R. and James M. Poterba. "The Alternative Minimum Tax And Effective Marginal Tax Rates," National Tax Journal, 2004, v57(2,Jun), 407-427.|
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- 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.
- 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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