This testimony focuses on the Alternative Minimum Tax (AMT), its interaction with the regular tax system, and its projected growth in coverage. GAO found that (1) AMT was designed to ensure that high-income individuals do not avoid significant income tax liabilities--for tax year 1997, about 14,000 taxpayers would not have paid any income taxes absent AMT, (2) AMT operates as a separate tax system that parallels the regular individual income tax system but with different rules for determining taxable income, different tax rates for computing tax liability, and different rules for allowing the use of tax credits, (3) AMT affected about one percent of taxpayers in 2000 and accounted for about $5.8 billion in additional tax revenue; by 2010, it is expected to increase the tax liabilities of about one out of six taxpayers and account for about $189 billion in tax revenues over the period, (4) the projected increase in AMT coverage is, for the most part, attributable to inflation and to the scheduled expiration of legislation temporarily excluding some tax credits from AMT rules, and (5) AMT's impacts include increased taxpayer compliance burden; increased Internal Revenue Service administrative cost; redistribution of the tax burden among taxpayers; changed economic incentives; and the potential to neutralize, for some taxpayers, changes to the tax system. This testimony summarized an August report (GGD-00-180)

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