Five years ago, almost no one had ever heard of it.
By last year it was being talked about, but almost no one understood it.
A few years from now, if nothing changes, it will be making spring tax season miserable for millions of Americans.
What is it? Why, it's the alternative minimum tax, set up decades ago by the geniuses on Capitol Hill to make sure that rich people don't duck out of paying taxes by using other provisions those same geniuses wrote into the law.
Under current law, according to experts at the Tax Policy Center of the Brookings Institution and the Urban Institute, almost 30 million taxpayers will be hit by the AMT in 2010, and if the tax cuts of 2001 and 2003 are extended, as President Bush is asking, that number will climb to almost 40 million by 2014. And under that scenario, by 2014 the AMT will account for more than 11 percent of federal revenue.
The AMT is inflicting pain already. The Tax Policy Center folks, in a new study, figure that people hit by the AMT this year will have to pay an extra $6,000, on average, over what their regular taxes would be.
Further, the taxpayers most likely to be hit by the AMT are not the truly rich. In fact, within a few years, taxpayers with incomes in the range of $75,000 will face a serious chance of being caught by the tax.
"The likelihood of being on the AMT increases with income, but only up to a point -- households with income above $1 million are always less likely to be on the AMT than those with somewhat smaller incomes," the new study found. (The reason is that the top regular tax brackets are higher than the AMT's top rate of 28 percent, making the tax bills of the very wealthy likely to be higher when calculated by the regular method.) "Moreover, the percentage of middle-class returns on the AMT explodes over time. By 2010, more than half of tax returns with incomes between $75,000 and $100,000 will be affected."
Even now, the levy falls most frequently on those taxpayers who range from upper-middle-class to quite well off -- those making $200,000 to $1 million a year.
Although it sneaks up on taxpayers, in concept, the AMT is fairly simple.
