March 21, 2013

Who Pays the Alternative Minimum Tax (AMT)?

One of my pet peeves is the claim that the Alternative Minimum Tax is "punishing" the middle class.  Or this general assumption that its "only" the middle class that pays  the AMT.   To my own surprise I haven't discussed this topic previously as far as I can see.

I wrote What is Alternative Minimum Tax and How Does it Work a few years ago to discuss the basics of how AMT works.   I later wrote Percentage of Population paying AMT that gives the % of population per state that pays AMT.   I touched on the fact that only about 2-3% of the entire population pays AMT.  

Lets look at more details on who pays AMT and how much...

If you pull up the IRS tax stats on the topic you can find the amount of AMT paid per income.   The figures below are using the latest 2009 figures that I found at the IRS.

First lets look at what % of each income group actually paid AMT:

(click image for full size)
At the lower income groups you can barely make out some very small slivers of blue.  For the groups making under $50,000 less than 0.1% of filers pay AMT.    Hardly anyone making under $50,000 pays AMT and very few people making under $200,000 pays it.

Once you get to the $100,000 to $200,000 group it hits a noticeable 6.6% but that still a small minority.   Only when you exceed $200,000 income do you see large numbers of filers paying AMT.    Interestingly the % of filers paying AMT is lower for the people reporting > $1,000,000 of income as you can see its down in the 20% range for those highest AGI groups.   

I'm not sure why the 7 figure highest income groups pay AMT less frequently than the 6 figure folks.  It may be for a number of reasons.   For one the top marginal tax rate exceeds the AMT rate so they may simply face a higher tax rate using the standard progressive rates.   Or they may be paying more capital gains rather than income taxes.   Its also possible that the highest income earners are more likely to use techniques to avoid AMT (or other taxes for that matter).

Now lets look at what % of the actual tax dollars are paid by each income group :
(click image for full size)

You can not really see the slivers representing the people making under $25,000 or $25,000 to $50,000 but you can see the labels showing 0%.  Its not truly 0% but if I went out with 2 decimals you'd see its 0.04% and 0.02% respectively.    Clearly the vast majority of people paying AMT and the vast majority of the taxes come from the upper income groups.   90% of AMT tax revenues are paid by people making over $200,000 a year.

Bottom Line :   The vast majority of tax filers paying AMT and the vast majority of the tax revenues is from people making over $200,000.


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