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Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
Edition 12ISBN: 978-1133189022 Exercise 2
The United States already has a flat tax. The ''Alternative Minimum Tax'' (AMT) allows an exemption of about $45,000 from income with the remainder being taxed at a flat 28 percent. The AMT also has far fewer special deductions and credits than does the regular income tax. Would it be a good idea to use the AMTto replace the current income tax? Would this tax be ''progressive enough''? What groups do you think would support such a replacement? Who would oppose it?
Explanation
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Fewer special deductions and credits under Alternate Minimum Tax, AMT, imply that the amount of income subject to tax under AMT is less than it is under the regular income tax. But data available shows exactly opposite picture.
The percentage of AMT taxpayers facing higher marginal tax rates under the AMT as compared to under the regular income tax structure is significantly high at 79 percent.
It would be incorrect to say that the AMT applies a lower marginal tax rate to a broader income base.
Moreover, AMT imposes serious marriage penalties. Thus, it is not a good idea to replace the current income tax with AMT.
AMT is progressive enough as the effective marginal tax rates increase significantly as the taxable income increases.
The middle-income households are expected to support such a replacement. However, taxes paid by high income households form more than half of AMT revenue. Thus, they will benefit the most if AMT is repealed (opposed).
The percentage of AMT taxpayers facing higher marginal tax rates under the AMT as compared to under the regular income tax structure is significantly high at 79 percent.
It would be incorrect to say that the AMT applies a lower marginal tax rate to a broader income base.
Moreover, AMT imposes serious marriage penalties. Thus, it is not a good idea to replace the current income tax with AMT.
AMT is progressive enough as the effective marginal tax rates increase significantly as the taxable income increases.
The middle-income households are expected to support such a replacement. However, taxes paid by high income households form more than half of AMT revenue. Thus, they will benefit the most if AMT is repealed (opposed).
Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder
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