The Alternative Minimum Tax for Individuals: Legislative Initiatives in the 110th Congress

Publication Date: January 2007

Publisher: Library of Congress. Congressional Research Service

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Research Area: Banking and finance

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Abstract:

The alternative minimum tax (AMT) for individuals was originally enacted to ensure that all taxpayers, especially high-income taxpayers, pay at least a minimum amount of federal taxes. However, the AMT is not indexed for inflation, and this factor, combined with the recent reductions in the regular income tax, has greatly expanded the potential impact of the AMT. Temporary provisions intended to mitigate the effects of the AMT will expire at the end of 2006. As a result, the number of taxpayers subject to the AMT will increase from 3.5 million in 2006 to 23 million in 2007. The Congressional Budget Office estimates that extending AMT tax relief would reduce federal revenue by $282 billion over the period FY2007 through FY2011. On January 4, 2007, Senate Finance Committee Chairman Senator Max Baucus and ranking member Senator Charles Grassley introduced S. 55, legislation that would repeal the AMT effective for tax years after 2006. House Ways and Means Committee Chairman Charles Rangel has also expressed concerns over the potential effects of the AMT and it is likely that the House will consider legislation addressing the AMT. This report will be updated as legislative action warrants.