2006 News Releases

For immediate release: August 18, 2006

Dallas Fed’s Economic Letter Focuses on Growing Burden of AMT

DALLAS—Reform is needed to curtail the growing reach of the individual alternative minimum tax (AMT), according to the August issue of the Federal Reserve Bank of Dallas’ Economic Letter.

In “The Looming Challenge of the Alternative Minimum Tax,” senior economist and research officer Alan D. Viard suggests that the AMT has complicated the tax code and become a burden for many taxpayers.

Under current law, the AMT—paid by only 200,000 taxpayers in 1990—now applies to 4 million taxpayers. The AMT is slated to spread further—reaching 22 million taxpayers in 2007—as AMT relief provided by recent tax cuts expires at the end of 2006.

“The complexity of our two-headed tax system has led to widespread—perhaps universal—agreement that reform is needed to prevent these burdens from being imposed on additional tens of millions of taxpayers,” writes Viard.

Many reform options have been proposed. They include keeping the AMT and limiting its spread, repealing the AMT outright, or even replacing the regular tax with the AMT. Any of these options would leave the government with the need to replace a large revenue stream, Viard states.

The August 2006 issue of Economic Letter can be found at www.dallasfed.org.

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James Hoard
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e-mail: james.hoard@dal.frb.org

 

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