File:AltMinTax.png

Summary

The above figure shows the AMT as a function of AGI and compares it to the tax on wages only without any deduction for a married couple filing jointly.

x <- seq(50,500,1)
y <- x
regionA <- x <= 58 
regionB <- x > 58 & x <= 175
regionC <- x > 175
y[regionA] <- 0
y[regionB]  <- (x[regionB] - 58) * 0.26
y[regionC]  <- (175 - 58) * 0.26 + (x[regionC] - 175) * 0.28

# standard_deducation <- 9.7
# exemptions <- 2
# exemption_credit <- 3.1
baseline <- 0

region1 <- x <= baseline
region2 <- x > baseline & x <= baseline + 14.3
region3 <- x > baseline + 7.15 & x <= baseline + 58.1
region4 <- x > baseline + 58.1 & x <= baseline + 117.25
region5 <- x > baseline + 117.25 & x <= baseline + 178.65
region6 <- x > baseline + 178.65 & x <= baseline + 319.1
region7 <- x > baseline + 317.1

x2 <- x
y2 <- x
y2[region1] <- 0
y2[region2] <- 0.1 * x2[region2]
y2[region3] <- 1.43 + 0.15 * (x2[region3] - 14.3)
y2[region4] <- 8 + 0.25 * (x2[region4] - 58.1)
y2[region5] <- 22.7875 + 0.28 * (x2[region5] - 117.25)
y2[region6] <- 39.9795 + 0.33 * (x2[region6] - 178.65)
y2[region7] <- 86.328 + 0.35 * (x2[region7] - 319.1)

# standard_deduction <- 7.35
# exemption_credit <- 2.8
baseline <- 0

region1 <- x <= baseline
region2 <- x > baseline & x <= baseline + 43.85
region3 <- x > baseline + 43.85 & x <= baseline + 105.95
region4 <- x > baseline + 105.95 & x <= baseline + 161.45
region5 <- x > baseline + 161.45 & x <= baseline + 288.35
region6 <- x > baseline + 288.35

pass1 <- 43.85 * 0.15
pass2 <- pass1 + (105.95 - 43.85) * 0.28
pass3 <- pass2 + (161.45 - 105.95) * 0.31
pass4 <- pass3 + (288.35 - 161.45) * 0.36

#x3 <- x-baseline
x3 <- x
y3 <- x
y3[region1] <- 0
y3[region2] <- 0.15 * x3[region2]
y3[region3] <- pass1 + 0.28  * (x3[region3] - 43.85)
y3[region4] <- pass2 + 0.31  * (x3[region4] - 105.95)
y3[region5] <- pass3 + 0.36  * (x3[region5] - 161.45)
y3[region6] <- pass4 + 0.396 * (x3[region6] - 288.35)

#setwd("~/")
bitmap(file="AMT.png",type="png256",width=6,height=6,res=300,pointsize=12)
par(mfrow=c(2,1))
par(mar=c(3.5,3.5,1,3.5))
par(xaxs="i")
par(yaxs="i")
par(mgp=c(2,0.5,0))
par(xaxt="n")
plot(range(x),range(c(y,y2,y3)),type="n",xlab="Adjusted Gross Income (thousands)",ylab="Tax (thousands)",log="x")
par(xaxt="s")
axis(1,at=c(20,50,100,200,500))
mtext("Adjusted Gross Income (thousands)",1,2)
lines(x,y,lwd=3)
lines(x,y2,col="blue",lwd=3)
lines(x,(y2-y),col="blue",lty=2,lwd=3)
lines(x,y3,col="orange",lwd=3)
lines(x,(y3-y),col="orange",lty=2,lwd=3)

legend("topleft",legend=c("2004 tax","2000 tax","TMT","2004 tax minus TMT","2000 tax minus TMT"),col=c("blue","orange","black","blue","orange"),lty=c(1,1,1,2,2),lwd=2,bty="n")

par(mar=c(3.5,3.5,1,3.5))
par(xaxs="i")
par(yaxs="i")
par(mgp=c(2,0.5,0))
par(xaxt="n")
plot(range(x),100*range(c(y/x,y2/x,y3/x)),type="n",xlab="Adjusted Gross Income (thousands)",ylab="% Tax rate",log="x")
par(xaxt="s")
axis(1,at=c(20,50,100,200,500))
mtext("Adjusted Gross Income (thousands)",1,2)

lines(x,100*y/x,lwd=3)
lines(x,100*y2/x,col="blue",lwd=3)
lines(x,100*y3/x,col="orange",lwd=3)

legend("topleft",legend=c("2004 tax","2000 tax","TMT"),col=c("blue","orange","black"),lty=c(1,1,1,2,2),lwd=2,bty="n")
dev.off()

Data sources:

• calculation scheme, sect"Calculating the AMT"<a rel="nofollow" class="external autonumber" href="http://www.cbo.gov/showdoc.cfm?index=5386&sequence=0">[1]</a>
• 2004 marginal tax rates <a rel="nofollow" class="external autonumber" href="http://taxes.about.com/od/2004taxes/qt/2004_tax_rates.htm">[2]</a>
• 2000 marginal tax rates <a rel="nofollow" class="external autonumber" href="http://www.moneychimp.com/features/tax_brackets.htm">[3]</a>

Licensing

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