Question

In: Accounting

The AMT was enacted to prevent high-income individuals from sheltering income through deductions.

The AMT was enacted to prevent high-income individuals from sheltering income through deductions. However, a large number of middle income individuals are now becoming subject to AMT. Do you think AMT has been effective? Was the federal government correct in passing the tax? What do you think should be the future of this tax?

Solutions

Expert Solution

Alternative minimum tax is designed in order to prevent the texspares from escaping their fair share of tax liability when their evading the tax liability but this was never intended to adjust ti inflation and this was majorly done in order to make the higher net worth middle class subject to taxation because they were trying to avoid it but this was even making the lower middle class suffer as they were becoming subject to the alternative marginal taxation but this taxation has been effective to a large extent because this has made high net worth individuals from middle class pay their taxes in advance and even other middle-class individuals are getting subject to tax.

 

I think Federal government has tried to pass a law indexing the alternative marginal tax amount to inflation and it is trying to make only highly net worth middle class individuals liable to alternative Marginal tax.

 

I think there is future for this taxation because alternative marginal taxation is better for government even though it is giving some sort of complexity to lower middle class but this is continuously readjusted according to the changes which are needed in the changing scenario and this is going to sustain a longer period of time if this will be subject to modification from time to time.


I think there is future for this taxation because alternative marginal taxation is better for government even though it is giving some sort of complexity to lower middle class but this is continuously readjusted according to the changes which are needed in the changing scenario and this is going to sustain a longer period of time if this will be subject to modification from time to time.

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