individual alternative minimum tax (AMT). In brief, my testimony makes the following points: Income inequality has been rising since the mid-1980s and now approaches levels not seen since the Great Depression. The federal tax system mitigates economic inequality—and potentially at lower economic cost than other alternatives, such as trade restrictions or labor market regulations—but the recent tax cuts have disproportionately benefited those at the top, exacerbating the trend in pre-tax income. The tax cuts have also vastly increased the number of people potentially subject to the AMT. Barring a change in law, more than twice as many people will owe AMT in 2007 as would have under pre-2001 law. Many of the new AMT taxpayers have modest incomes.
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