Paul L. Caron

Wednesday, April 24, 2024

Gamage & Glogower: The Policy And Politics Of Alternative Minimum Taxes

David Gamage (Missouri-Columbia; Google Scholar) & Ari Glogower (Northwestern; Google Scholar), The Policy and Politics of Alternative Minimum Taxes, 78 Nat’l Tax J. __ (2024):

National tax journalThis essay contributes to a literature offering qualified justifications for Alternative Minimum Tax (AMT) structures. We conclude that there is a narrow case for justifying AMTs even from the social planner perspective and that the proposed Billionaire’s Minimum Income Tax satisfies that narrow case. Next, incorporating governance collective action problems and electoral political constraints, we conclude that these considerations support a broader case for justifying AMTs that potentially also supports both preference-disallowance AMTs and the new corporate alternative minimum tax enacted in 2022.

Despite that tax experts often view AMTs with skepticism (Kamin, 2022), we conclude that it is difficult to dismiss plausible justifications for the use of AMT design structures under certain conditions. In Part II, we explained a limited pure policy justification for AMT design structures even from a social planner perspective and we concluded that the BMIT proposal’s use of an AMT design structure fits within that positive pure policy justification. More expansively, in Part III, we explained how a wider variety of AMT design structures might be justified as responses to governance collective actions problems, but we also cautioned that such advantages of AMT design structures must also be weighed against the additional complexity and associated costs potentially resulting from the AMT overlay. Finally, in Part IV, we concluded that AMT design structures can be justified by electoral political constraints but perhaps with even greater concerns about the potential for proliferating complexity.

Where does this leave us? Perhaps without any easy answers. In some narrow cases, like with the BMIT, we can potentially support the use of AMT design structures with some confidence. But in most scenarios the analysis must attempt to weigh the potential political and governance organizational advantages of AMT design structures against the disadvantages associated with administrative and compliance costs, complexity, and comprehensibility.

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