What does the Alternative Minimum Tax target?

The Alternative Minimum Tax (AMT) was designed to ensure that certain high-income individuals and corporations pay a minimum amount of tax, regardless of deductions, credits, and exemptions they may otherwise use to reduce their taxable income to zero. Essentially, the AMT creates a parallel tax system that alters the way taxable income is calculated, thereby limiting the benefits of certain tax breaks and ensuring that those who have the means to pay taxes do so.

This targeted approach stems from the concern that high-income earners could exploit loopholes to significantly decrease their tax liabilities, thereby not contributing their fair share to the tax system. The AMT applies to a subset of taxpayers who can trigger it based on their income level and various tax preferences, ensuring that a minimum level of tax is collected from them.

Other groups of taxpayers, such as low-income individuals and families, small businesses, and self-employed individuals, do not fall under the same scrutiny from the AMT. Instead, the AMT aims specifically at those whose financial circumstances allow for significant deductions or credits that could otherwise eliminate their tax obligations.