Option 38:

Eliminate the Individual Alternative Minimum Tax

Topline Estimates

Gross Domestic Product (GDP)
+<0.05%
Gross National Product (GNP)
-<0.05%
Full-Time Equivalent Jobs
-4K
Wage Rate
+<0.05%
Capital Stock
+<0.05%
Conventional Primary Deficit Change (10‑Yr)
+$271.1B
Dynamic Primary Deficit Change (10‑Yr)
+$268.9B
Dynamic Total Deficit Change (10‑Yr)
+$324.7B

Source: Tax Foundation General Equilibrium Model.

The alternative minimum tax (AMT) entered the tax code in 1969 following testimony from the Secretary of the Treasury that 155 high-income individuals had no income tax liability in 1967. It requires some taxpayers to calculate their tax liability under a separate set of rules that capture more income than the ordinary system by providing a larger exemption amount but fewer tax preferences. When calculating their alternative minimum taxable income, taxpayers must add back many preferences, including the standard deduction, the itemized deduction for state and local taxes (SALT) paid, and many others. The AMT then applies a different rate schedule (26 percent and 28 percent) to the resulting measure of income. Taxpayers pay either their ordinary individual income tax liability or their AMT liability, whichever is greater.

This option eliminates the AMT. Some taxpayers who would be in higher tax brackets, such as the 35 or 37 percent brackets under the regular income tax, are currently taxed under the AMT’s 26 or 28 percent brackets. As a result, while eliminating the AMT would reduce average tax rates, leading to lower revenue, it would increase marginal tax rates for some taxpayers.

However, by removing the AMT’s limitation on certain itemized deductions, this option would reduce the tax burden on investment in owner-occupied housing. On net, these economic effects roughly offset. These estimates do not account for a reduction in compliance costs that would result from eliminating the AMT.

On a conventional basis, this option would increase the primary deficit by $271.1 billion over the budget window. Long-run GDP would rise slightly, while long-run GNP would fall slightly, reflecting the larger budget deficit. Incorporating changes in interest costs, the publicly held debt-to-GDP ratio would be higher than baseline, reaching 178.1 percent by 2056.

On average, in 2036, taxpayers would see increases in their after-tax incomes of 0.1 percent, concentrated among high-income taxpayers.

Modeled Results

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About the Authors

Erica York Tax Foundation
Expert

Erica York

Vice President of Federal Tax Policy

Erica York is Vice President of Federal Tax Policy with Tax Foundation’s Center for Federal Tax Policy. Her analysis has been featured in The Wall Street Journal, The Washington Post, Politico, and other national and international media outlets.

Garrett Watson Tax Foundation
Expert

Garrett Watson

Director of Policy Analysis

Garrett Watson is Director of Policy Analysis at the Tax Foundation, where he conducts research on federal and state tax policy. His work has been featured in The Washington Post, The Atlantic, Politico, the Associated Press and other major outlets.

Huaqun Li Tax Foundation
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Huaqun Li

Senior Economist, Director of Modeling Projects

Dr. Huaqun Li is Senior Economist, Director of Modeling Projects at the Tax Foundation. She focuses on developing and maintaining the Foundation’s Taxes and Growth Model, which models the budgetary and economic effects of changes to federal tax policy.

William McBride or Will McBride Tax Foundation
Expert

William McBride

Chief Economist & Stephen J. Entin Fellow in Economics

Dr. William McBride is the Chief Economist & Stephen J. Entin Fellow in Economics at the Tax Foundation, where he oversees major research projects primarily related to reforming the federal tax code, advancing sound tax policy, and improving the federal government’s fiscal outlook.

Alex Durante Tax Foundation
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Alex Durante

Senior Economist

Alex Durante is a Senior Economist at the Tax Foundation, working on federal tax policy and model development. Alex worked as a research assistant at the Federal Reserve Board and served as a staff economist on the Council of Economic Advisers.

Alex Muresianu Tax Foundation
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Alex Muresianu

Senior Policy Analyst

Alex Muresianu is a Senior Policy Analyst at the Tax Foundation, focused on federal tax policy. Previously working on the federal team as an intern in the summer of 2018 and as a research assistant in summer 2020. He attended Tufts University, graduating with a degree in economics and minors in finance and political science.

Peter Van Ness Tax Foundation

Peter Van Ness

Research Software Developer

Peter Van Ness is a Research Software Developer at the Tax Foundation working on federal tax policy and model development. Peter previously worked as a research assistant at another think tank and as a data analyst at a consulting firm.

Aleksei Shilov Tax Foundation Research Software Developer

Aleksei Shilov

Research Software Developer

Aleksei Shilov is a Research Software developer at the Tax Foundation working on economic model development and federal tax policy. Aleksei joined the Tax Foundation as an intern in January 2025. He holds a B.S. in computer science and a minor in economics from Northeastern University and is currently based in Boston, MA.

Daniel Bunn Tax Foundation President & CEO
Expert

Daniel Bunn

President and CEO

Daniel Bunn is President and CEO of the Tax Foundation. Daniel has been with the organization since 2018 and, prior to becoming President, successfully built its Center for Global Tax Policy, expanding the Tax Foundation’s reach and impact around the world. Prior to joining the Tax Foundation, Daniel worked in the United States Senate at the Joint Economic Committee.