Fixing the AMT by Raising Tax Rates

Publication Date: April 2007

Publisher: Tax Policy Center

Author(s): C. Eugene Steuerle

Research Area: Banking and finance

Keywords: Economy; Federal Budgets & Fiscal Policy; Tax Policy; Tax Distribution and Economic Trends

Type: Paper

Abstract:

House Ways and Means Select Revenue Measures Subcommittee Chair Richard E. Neal, D-Mass., recently told reporters that fixing the alternative minimum tax was likely to involve increases in statutory tax rates rather than cutting back on preferences in the tax code. He said the former was "probably more realistic." Or is it? Raising rates at first seems easier than dealing with preferences that people want to keep. However, the simple fact is that real reform involves winners and losers. The only way to avoid that problem is to keep the status quo. But the status quo isn't tenable either: Taxpayers are increasingly dissatisfied with an AMT that continually raises their tax burdens, and in fairly arbitrary ways.