Selected historical and other data - Illustration

Statistics of Income Bulletin, Summer, 2003

Total income tax reflects the amount reported on the tax return and is, therefore, before any examination or enforcement activities by the Internal Revenue Service. It represents the income tax liability that was payable to the U. S. Department of the Treasury.

[36] The "alternative minimum tax" (AMT) on "tax preferences," first applicable for 1979, completely replaced the former "minimum tax" effective 1983, at which time many of the "preferences" subject to the minimum tax were subjected, instead, to the revised AMT effective for that year. Under AMT, generally high-income taxpayers to which the tax applied were required to pay the larger of the regular income tax or the AMT. Under the former "minimum tax," these taxpayers had to augment their regular tax by an additional tax, using a tax base related to "taxable income." Computation of the AMT was revised, effective 1980 (to allow tax to be reduced by certain credits); again, effective 1981 (to increase the number of preferences subject to tax and to modify the graduated tax rate structure); again for 1983 (to substitute a single, higher tax rate for the two, lower graduated rates); then again, effective 1987 (to change the starting point for computing "alternative minimum taxable income" from "adjusted gross income" to "taxable income," to change or eliminate many of the AMT adjustments to and exclusions from tax, and to increase the single tax rate); again for 1991 (to further increase the single tax rate); then, starting with 1993 (to substitute two higher, graduated rates for the one single rate). An additional change, effective 1987, was the elimination of the capital gain exclusion as a tax preference subject to the AMT. As of 2000, examples of preferences or adjustments subject to recapture through the AMT were accelerated depreciation, incentive stock options, certain itemized deductions, personal exemptions, certain tax-exempt interest, and income loss from tax-shelter farm or "passive" investment activities.

AMT is shown separately in the statistics for all years. However, starting with 2000, AMT is also included in "income tax before credits," as well as in "income tax after credits" and "total income tax." Previously, AMT was only included in "total income tax." See also footnote 35.

[37] "Earned income credit," allowed certain low-income recipients, was liberalized, starting with 1985, 1987, 1991, and 1994, and was further modified, starting with 1996 and 1998. Indexing for inflation was introduced into the credit computation, starting with 1985. In Table 1, the amounts "used to offset income tax before credits" and "used to offset other taxes" (that are income-related) are reflected in the statistics for "total tax credits"; however, "excess earned income credit (refundable)" is reflected in the statistics for tax "overpayments." The refundable portion of the credit is the amount (in excess of the taxes) that could not be credited, including any "advance earned income credit payments" on those returns that had such an excess. ("Advance earned income credit payments" were made to employees electing to receive such payments currently through their paychecks. Such "payments" are included in the statistics only if the employees also met the tax return filing requirements; advance payments received by those not required to file are, therefore, excluded.)