With Bush Tax Cuts In Effect, Cost of Patching AMT Nearly Doubles
by Craig Jennings, 9/10/2008
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 Inflation | 875 |
Increase in deficit | 691 |
Debt service | 184 |
Interactive Effect of Extending Bush tax cuts and of Indexing the AMT | 704 |
Increase in deficit | 597 |
Debt service | 107 |
Total Cost of Extending Bush Tax Cuts and Indexing the AMT for Inflation | 1,579 |