Stupid Question-- What is the alternative minimum tax?

The Alternative Minimum Tax (AMT) system exists as a parallel income tax system in the United States. The AMT system uses different rules for determining taxable income and allowable deductions, and uses a simple 26/28% rate calculation to determine the Tentative Minimum Tax (TMT). The TMT is compared to the income tax amount calculated for the taxpayer; if the regular income tax amount is greater than the TMT, no special action is required. If the TMT is greater than the tax calculated using the regular rules, the difference between the TMT and the regular tax is added to the regular tax amount, so that the taxpayer is obligated to pay the full amount of the TMT, though some of that tax is considered regular tax and some is considered AMT. The portion of the tax which is considered AMT may be available in later years as a Minimum Tax Credit, reducing the regular income tax due in later years, but only to the taxpayer's TMT level in those later years.

The AMT was introduced in 1970. It targeted very high incomes which were subject to many exemptions under the mainstream tax code of the time.

Critics of the AMT claim that it suffers from two flaws:

It is an extremely complicated system of rules, leading to high compliance costs
It inexplicably does not correct for inflation, leading to nonsensical effects as time goes by. By 2004, middle-class incomes were starting to become subject to the AMT.


http://en.wikipedia.org/wiki/Alternative_Minimum_Tax

and adjustments bring your tax rate below a certian point.

It was originally intended to keep the wealthy from using loopholes for tax avoidance.

It was put into effect a long time ago so that inflation has brought a portion of the middle class within range of the AMT.

It creeps down to cover more and more people, not just the very high income individuals. Easy fix, though: Adjust for inflation. Simple. Instead Repugs want to do away with it, which means it must be effective at forcing very high income folks to pay more in taxes than if it were not there. Otherwise, Repugs would not want to get rid of it, or would proposed adjusting it for inflation.

Just like SS, inheritance taxes, etc., they claim their is a problem that can only be fixed by repealing any progressive law on the books.