After I wrote about how Obama’s tax proposals would cut taxes for many wealthy households, some readers objected that I’d ignored the fact that the alternative minimum tax (AMT) would wipe out any potential tax savings. I had commented that the AMT could, in fact, do just that, but TPC had not yet estimated how many taxpayers would be affected. Research assistant Katie Lim has now generated those estimates and they show, as expected, that the AMT would take the potential tax cut away from many people.

Under Obama’s proposal to raise tax rates on high-income households, 63 percent of single taxpayers who would fall into the expanded part of the 28 percent tax bracket—those with taxable income between $174,900 and $194,350—would get no tax cut in 2011 because of the AMT (see graph). Another 2 percent would get only part of the tax cut as the AMT would claw some but not all of it back. Similarly, 71 percent of single filers getting a regular tax cut in the new 36 percent bracket—taxable income between $194,350 and $226,767—would lose all of that cut to the AMT and another 5 percent would lose some.

For married couples filing jointly, the situation is worse. Nearly 80 percent of those whose marginal tax rate would fall from 33 percent to 28 percent—those with taxable income between $212,900 and $235,750—would get no tax cut in 2011, as would almost 90 percent of those in the 36 percent bracket who would see their taxes fall if it weren’t for the AMT. In addition, between 3 and 4 percent of each group would lose some of the tax cut they would otherwise get.

The AMT's power to erase tax cuts is nothing new. The 2001 tax cuts relied on the AMT to hold down revenue losses. Every tax cut that affects upper-income taxpayers falls partially victim to the AMT. In 2010, the AMT will wipe out an estimated 18 percent of regular income tax cuts enacted since 2001.

Despite the AMT, the proposed “28-percent bracket tax cut” would survive for one-third of affected single taxpayers and one-sixth of affected joint filers. The AMT does a lot of damage but it doesn’t take the cut away from every high-income taxpayer.