The alternative minimum tax (or AMT) is an extra tax some people have to pay on top of the regular income tax. The original idea behind this tax was to prevent people with very high incomes from using special tax benefits to pay little or no tax. The AMT has increased its reach, however, and now applies to some people who don't have very high income or who don't claim lots of special tax benefits. Proposals to repeal or reform the AMT have languished in Congress for years, but effective action does not appear to be on the horizon. Until Congress acts, almost anyone is a potential target for this tax. fairmark.comPre-retirement, I was subject to the Alternative Minimum Tax a few times. (I don't enjoy paying taxes any more than you do, but I recognize them as the price to pay for living in a civilized society.) But if we are going to treat our individual citizens that way, it seems only fair to me that our corporate citizens be subject to the same system. There were 30 corporations that paid no income tax from 2008-2010, on total profits that exceeded $160 billion. In fact, they actually got refunds of over $10 billion. That amounts to a negative rate of 6.7%.
Don't get me wrong. I'm happy that these companies did well. They employ lots of people and make valuable things or provide important services. But outside of that I'm just not aware of what enormous contribution to the greater public good General Electric made to justify us all writing checks to them totaling $4.7 billion over the past three years. Or $681 million to Wells Fargo, $951 million to Verizon, and $9 million to Mattell. And it did come out of our pockets.
I see no reason why corporations shouldn't have to play by somewhat the same rules as the rest of us citizens do. So let's see what a corporate AMT might look like.
We can continue with GE as our example. Let's say the trigger level for a corporate AMT was profits of $1 billion, (That's surely high enough to exempt any small business, by any definition) and the AMT rate on profits above this figure was just 2%. On their 2010 profits of $11.7 billion, GE would owe a minimum of $214 million.
One hears the phrase "no skin in the game" from some folks when the topic of income taxes for persons with low incomes is discussed. Stated in those terms, a corporate AMT seems more than fair to me.
