The Absurd Report

With the annual exercise to limit its effect afoot, there is again much consternation over the alternative minimum tax. Forcing ever more taxpayers into a more onerous parallel tax system, the AMT has earned its place as the taxman’s bogeyman.

Yet despite elevated publicity, its effect is only a fraction of that coming in 2011 when the 2001 tax cuts expire. In fact both, not simply the AMT, demonstrate a tax system completely awry and two tax increases that must be avoided.

The AMT is a prime example of government compounding problems it created. Conjured into its first incarnation in 1969, the minimum tax was intended to correct the “problem” of a few hundred wealthy nonpayers of income tax.

That this was a problem at all is questionable, since these people used legal means and presumably received lower economic returns — such as accepting lower interest yields from tax-free bonds.

But simply solving a simple problem — repealing offending tax provisions allowing avoidance or prosecuting malefactors practicing evasion — is rarely Washington’s way. Instead such was the genius of the genesis of a second, parallel tax system that would flatter Rube Goldberg.

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