{
  "id": "RL31318",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "RL31318",
  "active": false,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 101122,
      "date": "2002-03-05",
      "retrieved": "2016-05-24T20:14:15.768941",
      "title": "Business Investment and a Repeal of the Corporate Alternative Minimum Tax",
      "summary": "With the U.S. economy either stuck in a recession or entering what some analysts anticipate will\nbe\na protracted period of sluggish recovery, Congress is considering various proposals to stimulate the\neconomy. One such proposal --  H.R. 3090 , which the House narrowly passed on\nOctober 24, 2001-- contains a variety of individual and business tax cuts, including a repeal of the\ncorporate alternative minimum tax (CAMT). This report assesses the likely stimulative effect of\nrepealing the CAMT.\n  A central aim of the CAMT is to prevent corporations that report substantial profits to\nshareholders from paying little or no federal income tax. Current tax law requires corporations to\ncompute their tax liabilities under the regular income tax and CAMT and pay whichever is greater. \nThough it adheres to many of the rules of the regular tax, the CAMT applies a lower and fixed\nstatutory rate to a broader definition of taxable income and a less generous set of deductions. \nDifferences in the timing of certain deductions -- especially for depreciation allowances -- account\nfor much of the increase in tax liability under the CAMT. Firms paying the CAMT are granted a\ncredit for those payments, which may be used only to offset future regular taxes.\n  It appears that both the absolute and relative importance of the CAMT as a source of federal\nrevenue shrank in the 1990s. In 1998, the most recent year for which data are available, CAMT\npayments totaled $3.3 billion, their lowest level since 1987, the first year of the tax. Similarly, the\nCAMT's share of total corporate income tax revenue was 1.8% in 1998, down from a peak of 8.4%\nin 1990. These declines are thought to stem from three significant modifications to the tax enacted\nin the 1990s and the pro-cyclical nature of the tax.\n  Income taxes affect business investment mainly through their impact on the cost of capital. \nIncreases in taxation raise this cost, decreasing the number of investment projects that are\nundertaken, and vice versa. Owing to its design, the CAMT may or may not increase a firm's cost\nof capital relative to the regular income tax. Key determinants of its effect on this cost include a\nfirm's initial tax status, the duration of its exposure to the CAMT, the assets being purchased, and\nfinancing method.\n  Because the CAMT appears to have an ambiguous effect on the cost of capital, its repeal would\nbe likely to affect business investment primarily through increasing the cash flow of firms affected\nby the CAMT. Although increased cash flow often is associated with rising business investment,\ncurrent economic conditions make it unlikely that an increase in the cash flow of the corporations\npaying the CAMT would lead to a substantial short-term increase in this investment. Many\neconomists contend the adoption of temporary investment tax incentives (e.g., a one-year, 30%\nexpensing allowance for purchases of equipment) would be likely to impart a bigger stimulus to\nshort-term business investment at a lower budgetary cost. A repeal of the CAMT and immediate\nrebate of unused CAMT credits could improve the economy's long-term growth prospects, but it\nwould do little to spur growth in the short run. This report provides background information and will\nnot be updated.",
      "type": "CRS Report",
      "typeId": "REPORTS",
      "active": false,
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      "topics": []
    }
  ],
  "topics": [
    "Economic Policy"
  ]
}