With Bush Tax Cuts In Effect, Cost of Patching AMT Nearly Doubles

In perusing CBO's latest budget forecast, I am once again taken by the magnitude of the 2001-2003 tax cuts (AKA the Bush tax cuts). But I nearly choked on my Atomic FireBall spicy cinnamon hard candy while reading Table 1-8, "The Budgetary Effects of Selected Policy Alternatives Not Included in CBO's Baseline," because I had forgotten how much more expensive the Bush tax cuts make fixing the Alternative Minimum Tax (AMT).

If the Bust tax cuts expire, it will cost $875 billion (including debt service) to index the AMT for inflation. But, the Bush tax cuts were designed such that the AMT would affect more families and bring in a lot more revenue than it otherwise would. The upshot is that if Congress extends the Bush tax cuts, it will cost $1.6 trillion to and index the AMT for inflation.

Costs of Extending Bush Tax Cuts and Indexing Alternative Minimum Tax for Inflation, 2009 - 20018
(billions of dollars)
Index the AMT for Inflation875
     Increase in deficit691  
     Debt service184  
Interactive Effect of Extending Bush tax cuts and of Indexing the AMT704
     Increase in deficit597  
     Debt service107  
Total Cost of Extending Bush Tax Cuts and Indexing the AMT for Inflation1,579
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