Law Commons^™

The Amt's Silver Lining, Brian D. Galle

Boston College Law School Faculty Papers

The federal Alternative Minimum Tax has potentially salutary – and heretofore unrecognized – effects that counteract pathologies of state budgets over the business cycle. A taxpayer’s AMT liability increases with income, and acts to eliminate federal tax subsidies for state revenue-raising. Thus, as a state’s income grows and the AMT hits more state residents, state spending becomes more expensive in flush times as the federal tax subsidy for state and local taxes is reduced. Conversely, when state fiscal health deteriorates, the federal tax subsidy grows as fewer state residents fall under the AMT, boosting taxpayer support for state spending. This …