The individual alternative minimum tax (AMT) operates parallel to the regular income tax, imposing a different income definition, allowable deductions, and rate structure. The AMT grew out of a minimum tax that first took effect in 1970, due to legislation enacted in response to public outrage in the wake of testimony by Treasury Secretary Joseph W. Barr (1969) that 155 high-income households had paid no income tax in 1966. Although it has historically applied to only a very small share of taxpayers, the tax is projected to grow rapidly over the next decade, transforming it from a class tax to a mass tax. The growth of the AMT will create problems of equity, efficiency, complexity, and transparency in the tax system. It will also inevitably force policy makers to focus more attention on the issue, in part because many reform options will prove expensive. This column provides new projections of AMT taxpayers and revenues, and uses the projections to examine some broader implications for tax policy and the AMT.

Both the original minimum tax and its successor, the individual alternative minimum tax (AMT), have applied in the past to a small minority of high-income households. But barring a change in law, this "class tax" will soon be a "mass tax." By the end of the decade, repealing the AMT will cost more than repealing the regular income tax. This paper explains how a tax originally designed to target 155 taxpayers could grow to cover 36 million, discusses economic issues related to the alternative minimum tax and examines options for reform.

Both the original minimum tax and its successor, the individual alternative minimum tax (AMT), have applied in the past to a small minority of high-income households. But barring a change in law, this "class tax" will soon be a "mass tax." By the end of the decade, repealing the AMT will cost more than repealing the regular income tax. This paper explains how a tax originally designed to target 155 taxpayers could grow to cover 36 million, discusses economic issues related to the alternative minimum tax and examines options for reform.