A strain of comments have reasonably wondered: why do we need a Buffet rule when we already have an Alternative Minimum Tax (AMT), presumably created to accomplish a similar goal of not allowing the wealthiest families to avoid paying their fair share by exploiting loopholes?
My first reaction was: well, if the AMT worked, we wouldn’t need the Buffett rule. But when you look at the results I enumerate here—lots of very rich people face average rates at or below that of the middle class–it’s clear the AMT ain’t working.
But, as is my wont, I checked this hunch with tax experts at CBPP, and here’s what I got (h/t, CCH):
–It (the AMT) obviously doesn’t work very well, because all of the statistics (see link above) and pictures like the one below, from here, are with the AMT in place!
–As the figure shows, the AMT fails to block the preferential treatment of asset-based, or investment, income, like cap gains and dividends…and these types of income mean a lot to millionaire+ households.
–AMT rates are still well below top marginal income tax rates: 26% and 28% instead of 35% (going up to 39.6% if those darn highend Bush cuts ever sunset).
–Still, without the AMT, the after-tax distribution would be even more skewed than it already is, so it’s doing some good.