Articles on proposals for fixes for the alternative minimum tax (AMT), whether temporary or permanent, usually describe these fixes as being expensive due to the lost tax revenue they imply. This is misleading. The income brackets for the AMT are not indexed to inflation. This means that if there is no "fix," then the tax will apply to people further down the income ladder every year. At this point, the absence of a fix would cause an additional 20 million taxpayers to be subject to the AMT. Congress has always voted to install a fix because there would be a huge political backlash if so many middle income people suddenly experienced the tax increase implied by the AMT, and everyone expects that there will continue to be fixes in future years. However, by delaying the fix until the last minute, the revenue that would be generated without a fix is included in budget projections, understating the size of the projected deficit. The Congressional Budget Office routinely reports the cost of "fixing" the AMT throughout its projection period. It would be appropriate for reporters to include this cost when discussing deficit projections, since it is virtually certain that such a fix will take place.
--Dean Baker