“[t]he AMT has potentially salutary—and heretofore unrecognized—effects that counteract pathologies of state budgets over the business cycle. AMT liability increases with income, and acts to eliminate federal tax subsidies for state revenue raising. Thus in flush times, when a state’s income grows so that the AMT hits more state residents, state spending becomes more expensive as the federal tax subsidy for state and local taxes is reduced. Conversely, when state fiscal health deteriorates, the federal tax subsidy grows as fewer state residents fall under the AMT, boosting taxpayer support for state spending. This stabilizing mechanism has the potential to overcome problems state politicians face committing to saving during boom times and spending during bust times.“
Read the full article following the link for the details, but essentially the authors are arguing that, surprisingly, the AMT provides a degree of fiscal stabilization for governments. Could this most odious tool of the federal tax system possibly have the benefits they claim? Read on and decide for yourself.