Alternative Minimum Tax AMT

The alternative minimum tax (AMT) presents one of the most controversial policies in the history of the United States. Originally, Congress justified the corporate AMT on the simple premise that firms reporting large amounts of book income to share­ holders should be required to pay some substantial amount of tax. Today, several more sophisticated arguments have been developed by policy defenders to rationalize its importance within the country’s diverse socio-political and economic prospects (Burman et al., 2003). The most frequently made argument in defense of the corporate AMT takes the broad form that a minimum tax will make the tax system fairer. For instance, Robert (2018) recognizes the essence of AMT by arguing that it fuels a sense of equality in the business domain. According to him, it would be unfair for corporations such as the fortune 500 to pay fewer taxes than employees who work for low-income within the same organizations. Another argument that supports the policy identifies that corporate AMT influences corporations to become less inclined to invest in tax-preferred assets – an aspect that consequently enhances investment efficacy by focusing on projects with higher returns (Brown & Chandler, 2008).

Nonetheless, critical reflections identify AMT as one of the tax-related policies whose implications are far more damaging than the contrary. To begin with, corporate AMT is basically a biased policy (Schmid, 2018). It discourages firms in specific industries from furthering their investments; this owes to the fact that the complex adjustment of AMT decreases the incentives, thus discouraging specific investments (Feenberg& Poterba, 2003). Additionally, AMT negatively affects marginal tax rates for the given firms –an aspect that limits the capacity of firms to focus on tax-advantaged investments. Feenberg & Poterba (2003) adds that a prominent lack of integrity exists in AMT policy, particularly in the sense that it opens doors for corruption. For instance, corporations have been known to use AMT as a tax shelter to obviate tax liability on their incomes. Moreover, the policy fuels the inflation of book income among corporations.

References

Brown, M. A., & Chandler, S. (2008). Governing confusion: how statutes, fiscal policy, and regulations impede clean energy technologies. Stan. L. & Pol’y Rev., 19, 472.

Schmid, P. F. (2018). The Tax Regulations Making Process—Then and Now. The Tax Lawyer, 541-549.

Burman, L. E., Gale, W. G., & Rohaly, J. (2003). Policy watch: The expanding reach of the individual alternative minimum tax. Journal of Economic Perspectives, 17(2), 173-186.

Feenberg, D., & Poterba, J. (2003). The alternative minimum tax and effective marginal tax rates (No. w10072). National Bureau of Economic Research.

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Discussion Question #1: Alternative Minimum Tax AMT

Some parties believe that many corporations are paying little, if any, corporate income tax and blame the AMT for being ineffective. Examine both the government and client side of this issue. Use online resources and cite where necessary to justify your positions.

Alternative Minimum Tax AMT

For discussion: Once your research has been completed, examine this issue in an unbiased fashion. What is your position on the matter? Defend your position with credible references and/or examples, providing links when necessary to help your classmates following your rationale.