By 2008, the AMT Will Cost More to Repeal Than the Regular Income Tax

Taxpayers pay alternative minimum tax (AMT) if their AMT liability exceeds their regular income tax. Originally targeted at a few high-income households who paid no federal income tax, this class tax is about to become a mass tax. The projected expansion occurs because the AMT is not indexed for inflation and because last year's tax cut steadily pares regular income tax obligations without providing significant and sustained AMT relief. The increases are troubling because the AMT is notoriously complex and has dubious effects on equity and efficiency.