Alternative Minimum Tax increase looms

Senate Minority Leader Mitch McConnell (R-KY) walks with reporters on his way to a meeting with Republicans on Capitol Hill December 30, 2012 in Washington, DC.

The Alternative Minimum Tax (AMT) has been around, in some form or another, since the 1960s.

“The Alternative Minimum Tax was put in place to try to make sure that high-income people pay at least some tax,” says Len Burman, Daniel Patrick Moynihan Professor of Public Affairs at Syracuse University.

Back then, there was no limit on how many deductions rich people could take, and because of that, many politicians argued the wealthy weren’t paying their fair share.

But the AMT has a quirk. Unlike other taxes, it wasn’t adjusted for inflation. So, every year or two, congress has adjusted it on a short-term basis.

But this year, lawmakers haven’t done that, which means almost 30 million taxpayers could be affected.

So, why isn’t the AMT adjusted for inflation?

“I don’t know if people thought it would stick around for as long as it did,” says Dan Shaviro, the Wayne Perry Professor of Taxation at the New York University School of Law.

To link it to inflation today, permanently, would cost the government hundreds of billions of dollars.

About the author

David Gura is a reporter for Marketplace, based in the Washington, D.C. bureau.

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