Tax Reform Act of 1969 to target the rich. But because the rates were not adjusted for inflation, it now targets not only the rich but also the middle class, and there seems to be no end to the problems its causes.
With the AMT most tax deductions are disallowed. In 1969 the minimum tax was a 10 percent flat rate. Over the years the AMT has evolved to also include a corporate AMT; with each tax reform effort from the Carter to Clinton Administration the AMT has increased. As of
the latest revision, which was passed in 1993, there is a two tier system: 26 percent and 28 percent for individuals. Here is a look back through media reports and presidential and congressional messages about the origins of the AMT in the Johnson and Nixon Administrations and its subsequent revisions in the Carter, Reagan, Bush and Clinton Administrations.
President Lyndon Johnson and the Origins of the AMT
The story of the AMT begins with the Vietnam War. The government needed to secure additional funds to finance the war which in 1968 and 1969 was at its peak.
According to Sheldon D. Pollack in
The Failure of U.S. Tax Policy: Revenue and Politics, the need for new revenues led the executive branch "to embrace a conception of 'tax reform' consisting in closing revenue 'leaks' and reversing the 'erosion' of the tax base concomitant to the many preferences that had crept into the tax code." In his administration's last month in office President Lyndon Johnson named Joseph Barr treasury secretary. Both Barr and Assistent Secretary of the Treasury Stanley S. Surrey instigated the proposals to tighten the tax loopholes that eventually led to the creation of the AMT.
August 1969 as he was preparing the next year's budget Barr warned that the country faced a taxpayers' revolt. He explained, according to the
Washington Post,
that in 1967 there were a total of 155 individuals with incomes over $200,000 who did not pay any federal income taxes; twenty of them were millionaires. These individuals successfully used all tax loopholes available to legally evade paying taxes. The revelation attracted wide media attention and led to public shock. As he presented the next annual budget, published in the final weeks of his administration, President Johnson indicated that the problem needed to be addressed, but not by him:
We believe that in justice to the next Administration that will take office within the next month and will have to live with and administer any legislation passed, it is only appropriate that they have the opportunity to examine carefully and make their judgments to these matters.
Several possible solutions were discussed at the time including, according to anonymous sources with the House Ways and Means Committee run by Wilbur Mills, "the establishment of some sort of minimum tax on persons with large incomes who escape all taxation at present because their income is entirely from sources that receive preferred tax treatment, such as oil wells or municipal bonds." ("Tax Law changes Sought by Mills," NYT, January 1, 1969)
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