NCPA Supports Call For Abolition Of Alternative Minimum Tax

by Mike Godfrey, Tax-News.com, Washington

17 October 2001

The National Center For Policy Analysis has supported President George Bush's calls earlier this month for the elimination of the alternative minimum tax (AMT), pointing out that the federal government actually loses revenue from the AMT.

The AMT is a separate tax system which runs parallel to corporate income tax, and US companies pay whichever rate is the higher. This tax, argues the NCPA, acts as a positive disincentive for investment, and should be abolished in order to help stimulate the floundering US economy.

According to Bruce Bartlett, a senior fellow at the NCPA: 'The AMT actually raises no net revenue for the federal government- yet [it] imposes severe economic costs that inhibit investment.' Mr Bartlett also points out that corporate AMT liabilities are likely to rise during a recession, as accumulated depreciation from past investments triggers a liability for many companies when profits fall due to lower sales.

Another quirk of the unpopular tax is that US companies are allowed credits for past AMT payments in years when they have had no liability. This has led to the slightly nonsensical situation whereby for the last 6 years, AMT credits have exceeded gross receipts; between the years of 1995 and 1998, the federal government actually took $2 billion less in revenue than if corporate AMT had not been imposed.

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