Working Paper: NBER ID: w10072
Authors: Daniel Feenberg; James Poterba
Abstract: This paper examines the impact of the Alternative Minimum Tax on the weighted average marginal tax rates that apply to various components of taxable income. It also considers the impact of several AMT reform proposals on the number of AMT taxpayers, the total revenue collected from the AMT, and the weighted average marginal tax rates that apply to wages, capital income, and deductions such as state and local taxes and charitable gifts. The paper uses the NBER TAXSIM model to project federal personal income tax liabilities as well as AMT liabilities between 2003 and 2013. The AMT has only a modest impact on the average marginal tax rates for most sources of income because some AMT taxpayers face higher marginal tax rates, and others lower tax rates, as a result of the tax. The projections show that modest increases in the AMT exclusion level have substantial effects on the number of AMT taxpayers, and that indexing the AMT parameters would reduce the number of AMT payers in 2010 by more than sixty percent. These changes would also reduce the AMT's impact on average marginal tax rates.
Keywords: Alternative Minimum Tax; Marginal Tax Rates; Tax Policy
JEL Codes: H24; H62
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| AMT exclusion levels (H26) | number of AMT taxpayers (H26) |
| number of AMT taxpayers (H26) | average marginal tax rates (H29) |
| AMT exclusion levels (H26) | average marginal tax rates (H29) |
| various reform proposals (D72) | weighted average marginal tax rates (H21) |
| AMT (Y20) | taxpayer incentives to work and save (H31) |
| AMT (Y20) | weighted average marginal tax rate on wage income (H31) |
| AMT (Y20) | weighted average marginal tax rate on interest income (E43) |
| AMT (Y20) | weighted average marginal tax rate on capital gains (H21) |