THE INDIVIDUAL AMT - WHY IT MATTERS

The individual alternative minimum tax (AMT) is a complicated tax that currently affects relatively few taxpayers (700,000 in 1997) and rais es relatively little revenue ($4.5 billion in 1997). By 2007, however, the number of AMT taxpayers will reach 9 million and their AMT liabil ity will reach $21 billion. The reason for these very sharp increases is that the main parameters (e.g., personal exemption and rate bracket widths) of the regular income tax are indexed for inflation, whereas the main parameters (e.g., AMT exemption) of the AMT are not. This pap er discusses the structure of the individual AMT and examines the long -run effects of the AMT.