President Donald Trump’s administration unveiled a tax plan on Wednesday that proposes lower taxes across the board and a number of alterations to the tax code.
Treasury Secretary Steven Mnuchin and National Economic Council director Gary Cohn announced the plan during a White House press briefing.
One proposal in the plan is the repeal of the so-called alternative minimum tax. The decades-old tax, which was enacted to make sure the rich pay their fair share, cost Trump $31 million in 2005.
As Business Insider’s Jim Edwards reported, that “accounted for most of the $38.5 million in taxes” the president paid in 2005.
What is the alternative minimum tax?
The original purpose of the AMT was to prevent very wealthy Americans from using deductions and loopholes to skimp on their taxes.
One way to look at it is as a secondary tax code. The AMT has a set of rates and rules that are distinct from the regular tax code and apply to certain high-income earners, trusts, estates, and corporations.
So when corporations or individuals fall under the auspices of the AMT, their tax bills are figured out differently than those of ordinary taxpayers.
According to Bankrate’s Kay Bell, “Basically, it’s the difference between your regular tax bill, figured using ordinary income tax rates, and your AMT bill, figured by filling out more IRS paperwork. When there’s a difference, you must pay that amount, the AMT, in addition to your regular tax.”
The point of the AMT is to make sure wealthy Americans who earn above a certain amount pay a flat minimum tax rate — hence the name — even if they could get away with paying zero or very little taxes in the regular system. But many opponents of the tax say it now targets people in the upper-middle class, not the uber-rich.
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