An article in Fortune Magazine details how the regime of the AMT (alternative minimum tax) is on a path to expand dramatically. The AMT is an obscure section of the tax code that computes individual taxation in a parallel universe in which almost none of the standard deductions are allowed. The tax payer must pay at least the amount of the AMT when their tax as computed by the regular rules would be lower.
When originally instituted, the AMT only affected a few taxpayers in the highest income brackets. But:
According to a recent study by the Urban-Brookings Tax Policy Center--class warriors, please note, this is a liberal think tank--the number of Americans exiled to AMT land is about to explode. This year the AMT will catch only 2.4 million families and individual taxpayers. By 2005 that will leap to 12.7 million, and it keeps soaring. Indeed, by 2010, 33 million taxpayers, one-third of the total, will pay the AMT if the rules aren’t changed.
The AMT is even scarier when you look at this growth in dollar terms: This year it will bring in $16 billion, around 2% of all federal income tax revenue. By 2010 the AMT will harvest $124 billion, or around 1% of the total GDP. Perhaps the most shocking way of expressing it is this: By 2010, 55% of the income generated in this country will be subject to the AMT. If Washington does nothing, the AMT is on track to supplant the existing body of rules, rates, and deductions and become the dominant tax system in the U.S.
