Question

Several Presidential and Congressional task forces have recommended the abolition of the alternative minimum tax (AMT). Among the reasons often given has been the fact that more and more middle-income taxpayers are being affected by this tax, neutralizing some of the incentives Congress has created in the tax system.

In your opinion, what was the original purpose for the AMT for individual taxpayers? Is that purpose being met?

If it is being met, why would the task forces, among others, push for its abolition?

If it’s not being met, why has Congress not abolished the AMT already, in your opinion?

Answer 1

The purpose of AMT is to prevent taxpayers from escaping their fair share of tax liability through tax breaks. The aim is to limit taxpayers from reaping too much benefit under regular income tax law. The government has provided various tax deductions for middle income taxpayers and that lowered or almost eliminated the tax liability for middle income taxpayers. The main purpose of AMT is to collect a fair share of tax from individuals. Originally AMT was bring in the system to counter the tax evasion and minimize benefit from tax planning and tax management. So we can say that to the extent the purpose of AMT is met as it recovered minimum share of tax and prevent from taking excessive and unfair benefit.

The task forces among others are push for abolition of AMT because it burden a lot for middle income taxpayers. Its good for high income taxpayers but not fair for lower middle and middle income taxpayers.

Congress has not abolished the MAT even if its purpose being not met because it generate to the extent some revenue for government. Even if purpose is not met, it is beneficial for revenue. We can say that purpose is not met as expected from it but some extent additional revenue are generated by it.