Treasury Announces Review Of Alternative Minimum Tax

by Mike Godfrey, Tax-News.com, Washington

04 February 2004

The Treasury Department's assistant secretary for tax policy, Pam Olson, announced on Monday that the government is to examine alternatives to the increasingly unpopular Alternative Minimum Tax.

Olson explained to reporters that, as part of the President’s proposals for the 2005 budget, the White House has asked the Treasury to formulate a “long term” solution for AMT reform.

The AMT cuts in when a person's tax falls below a certain percentage (depending on total income) because of 'excessive' use of tax breaks. But the AMT isn't indexed for inflation, and because recent tax cuts have added a lot of new breaks, millions more people in coming years will have to pay the AMT. National Taxpayer Advocate Nina Olson has likened the situation to a “timebomb on a short fuse” and has been one of many influential figures urging Congress to scrap the unpopular tax.

Whilst the Bush administration has proposed the extension of a temporary solution to alleviate the problem, the price tag attached to it is estimated at $23.36 billion over the next two fiscal years. The removal of the tax altogether is likely to cost in the hundreds of billions.

According to the Treasury, proposals for AMT reform will be presented in time to be assimilated into the 2006 budget.

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