The Bill for Fixing the AMT? $1 Trillion

The Wall Street Journal (registration required) is reporting that the White House put the cost of correcting the expanding sweep of the Alternative Minimum Tax (AMT) at $1 trillion in its annual economic report. However, the administration does not make any recommendations on how to address the fact that the AMT is beginning to hit the middle-class who were never intended to be paying for it creating a higher tax burden for those individuals.

The AMT is a sort of shadow tax that hits high-wage earners when they claim excessive credits, deductions and other breaks. The AMT was designed to hit ultra wealthy taxpayers using sophisticated schemes to unfairly avoid tax. But because it isn't indexed for inflation, the AMT is starting to affect many middle-class taxpayers, as rising wages push them into its scope.

In releasing the report, White House Chief Economist Greg Mankiw defended the administration's approach, noting President Bush has appointed a tax-overhaul advisory commission expected to make recommendations this summer. If the government repealed the AMT outright, that would mean raising $1 trillion of taxes on some other group.