Tax Foundation models 86 tax-code changes, led by AMT simplification

The Tax Foundation has published Options for Reforming America's Tax Code 3.0, a book that models the economic, distributional and revenue effects of 86 changes to the federal tax code. The blog post built around that book picks out the entries the organization says would significantly simplify the code rather than complicate it, and the first it takes up is the alternative minimum tax—a target whose arithmetic cuts oddly for a simplification pitch.

The AMT runs alongside the regular code, setting a floor on what an individual or a business owes and typically forcing the taxpayer to compute liability twice. The individual version has been in place since 1969; the corporate version arrived in 1986 and was repealed starting in 2018 under the Tax Cuts and Jobs Act, while several later statutes—most recently the TCJA and the One Big Beautiful Bill Act—have limited the individual AMT's reach. The Congressional Budget Office projects fewer than 600,000 taxpayers will pay it in 2026, roughly 0.3 percent of all returns, and for the filers who do, the cost is not abstract: the National Taxpayer Advocate once wrote that "the AMT nearly doubles the burden of filing a federal income tax return."

The more useful half of the Tax Foundation's argument concerns what produces low effective rates in the first place. Low average rates, the post contends, are not by themselves evidence of a policy problem, because a simplifying reform such as full expensing for capital assets can hold effective business rates down in the near term and largely even out over time—which the organization frames as a pro-growth result rather than a flaw. Where low average rates trace to credits and deductions Congress itself wrote, lawmakers have answered with AMTs instead of confronting those preferences directly, and that is how the code acquired two parallel systems to file under.

For advisors, the format may matter as much as the recommendations, because each option carries economic, distributional and revenue modeling—close to the three questions a client planning memo already answers: what it does to growth, who pays more or less, and what it costs the Treasury. The distributional column is the one clients ask about; the revenue column is the one that determines whether an option survives contact with a markup. PWD wrote earlier this month about the Generating Retirement Ownership Through Long-Term Holding Act, where the foundation's fund-versus-ETF comparison did the analytic work behind a narrow capital-gains deferral, and the pattern holds that the modeling tends to show up in legislative argument before it shows up in a client meeting.

The AMT's own arithmetic cuts oddly for a simplification target. Two successive laws have narrowed the individual version, and its projected payer count sits under 600,000 returns, so the revenue at stake is small next to the political value of the floor, which exists because lawmakers wanted visible assurance that high earners pay something. The option is worth carrying into a scenario conversation now rather than after a bill appears because the payer count is low enough to make repeal cheap on paper, the optics are the harder test, and the book's revenue columns are where that trade gets priced.