Cracking the Code: Making Sense of the Corporate Alternative Minimum TaxBrookings Institution Press, 2010 M12 1 - 168 pages The corporate alternative minimum tax (AMT) was hailed in the Tax Reform Act of 1986 as instrumental to ensuring that tax loopholes would not permit corporations to avoid paying their fair share of tax liability. In 1995, less than ten years later, repeal of the AMT was pledged as part of the Republican Party's "Contract with America" and passed by the House of Representatives. Opponents of the AMT object that it penalizes new investment by firms and prevents the use of legitimate deductions. Its defenders tout the ability of the AMT to address public perceptions of unfairness in the tax system. At first glance, the debate over the AMT seems to be another example of the classic struggle between equity and efficiency. But, as this book reveals, there are serious flaws in the arguments used on both sides of this issue. As a result, the AMT may fail to achieve any notable equity objectives and may miss the opportunity to make significant improvements in the efficiency with which the nation's scarce capital is employed. Whether or not reforms of the AMT are ultimately enacted, the debate over the AMT raises fundamental questions of tax policy that will persist: Who benefits from tax subsidies? How much should the tax code be used to direct resources in the economy? If corporate taxes are ultimately borne by individuals, how do corporate tax provisions affect fairness? Andrew Lyon opens these topics up to a wide audience, presenting new data on the impact of the AMT, and offering suggestions for future policy reform. He argues that the legislative desire to respond to an apparent inequity should be channeled into considering whether there are efficiency reasons for reducing the tax advantages observed. The best solutions to these considerations, he contends, are not found in a minimum tax. |
Contents
Introduction | 1 |
Tables | 2 |
The Structure of the Alternative Minimum | 15 |
Figures | 18 |
Does a Minimum Tax Improve Fairness? | 48 |
Does a Minimum Tax Improve Efficiency? | 62 |
Investment Incentives under | 77 |
15 | 101 |
A Look at Alternative Minimum Tax Firms | 103 |
Effects of the Alternative Minimum | 117 |
Options for Reform of | 129 |
Notes | 137 |
Index | 152 |
Other editions - View all
Cracking the Code: Making Sense of the Corporate Alternative Minimum Tax Andrew Lyon Limited preview - 2010 |
Cracking the Code: Making Sense of the Corporate Alternative Minimum Tax Andrew Lyon Limited preview - 2010 |
Cracking the Code: Making Sense of the Corporate Alternative Minimum Tax Andrew B. Lyon No preview available - 1997 |
Common terms and phrases
accelerated depreciation additional adjusted current earnings adjustments and preferences after-tax return Alternative Minimum Tax amortization amount AMT and loss AMT credits AMT depreciation AMT firms AMT liability AMT or loss AMT status calculated chapter compliance costs COMPUSTAT Corporate Tax Return cost of capital current earnings adjustment debt finance depreciation adjustment depreciation deductions economic income efficiency equity finance firm's foreign tax credits Glenn Hubbard Income Corporate Tax increase industry intangible capital investment in equipment investment incentives investment tax credit loss firms loss position loss status market failure ment operating losses period pretax return rates of return regular tax firms regular tax liability regular tax purposes regular tax schedule regular tax system result revenue shareholders Statistics of Income tax incentives tax loss tax payments tax planning tax preferences tax provisions Tax Reform Act Tax Return Files tax status tax treatment tax-preferred activity tax-preferred assets taxable income taxation taxpayers tentative minimum tax