the one time exemption of $33,750 has remained constant unadjusted for inflation while average tax preference incomes, such as capital gains, have increased; (2) many itemized deductions such as property taxes, state income taxes, depreciation and mortgage interest deductions have greatly increased; and (3) due to special IRS rulings, one time gains which are not taxable under other provisions of the IRC, such as imputed gains on the exercise of employee stock options, are included in income for AMT purposes. The net effect is that over time the AMT "reaches further down the economic ladder" (Crenshaw, 2001, March 4), increasing the tax burden in 2000 of 1,300,000 taxpayers, a figure which is expected to increase by a factor of nine by 2010 and by more than 20 times if the Bush tax plan before Congress becomes law (p. H1). According to Rosenbaum (2001, April 26), the Treasury estimates that by 2008 nearly 13 percent of taxpayers with adjusted gross incomes of $75,000 to $100,000 and by 2016 29 percent of those in that range will be adversely impacted by the AMT (p. A14).
Result Desired. The political problem posed by the impact of the AMT is that it negates the middle class tax cut which was promised but never delivered by the Bill Clinton administration and reduces in large part for many taxpayers the tax reductions they would otherwise receive from enactment of the Bush across the board rate reductions in every tax bracket. Former House Ways and Means Committee Chairman, Republican Bill Archer, called it "a ticking time bomb" (Crenshaw, 2001, March 4, p. H1). The simplest way to cure the problem would be to eliminate the AMT entirely and increase the regular income tax rates payable by very high income taxpayers. However, such an approach is probably not politically feasible because the Bush administration wants to reduce not increase the tax rates payable by higher (as well as lower) income taxpayers and the great majority of t...