Alternative Minimum Tax
RSS Issue FeedBACKGROUND
The AMT is an alternative tax system, originally designed to ensure that all taxpayers paid some tax. The AMT applies a different set of rates to an income base that does not recognize certain exemptions and exclusions. If the AMT is greater than the tax owed under the normal tax system, then you pay the AMT amount. When originally enacted, the AMT was not indexed for inflation. As a result, the AMT affected a greater percentage of taxpayers every year.
In addition to being extremely complex, the AMT increases the cost of capital, discourages investment, and stifles economic growth. The AMT negates many of the capital formation incentives provided under the regular tax system, particularly accelerated depreciation, which frees up capital that can be deployed into new plant and equipment and other productive uses.
Congress has historically dealt with the AMT with a series of short term "patches," often resulting in uncertainty for taxpayers. The last short-term patch was a two year fix enacted as part of the "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (the Temporary Relief Act)" in December 2010, that expired on December 31, 2011.
Congress enacted a more permanent fix to the AMT in the "American Taxpayer Relief Act of 2012 (the Act)", which President Obama signed into law on January 1, 2013. The Act increases the 2012 individual AMT exemption to $50,600 for unmarried filers and $78,750 for married couples filing jointly and permanently indexes those exemption amounts for inflation beginning in 2013.
Nevertheless, the AMT remains extremely complex and burdensome for both individuals and businesses. Even businesses not subject to the tax must go through the computations to determine if they are liable.
CHAMBER POSITION
The U.S. Chamber supports measures to simplify and further reduce the scope of the corporate and individual AMT, while working towards full repeal of both.
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