What you need to know about the dreaded Alternative Minimum Tax
The Alternative Minimum Tax (AMT) was introduced in 1969 as a way to ensure that extremely high-income taxpayers paid their fair share. For the 1967 tax year, just before the tax was first enacted, 155 taxpayers with incomes of more than $200,000 (indexed for inflation, that's roughly $1.3 million today) didn't pay a dime in federal income tax. Of those 155 taxpayers, 20 were considered millionaires, with incomes that would be valued at more than $5.9 million in today's dollars.
But something strange happened with the AMT. The government never indexed the tax for inflation, meaning it started affecting a growing number of people as wages and other earnings kept pace with inflation. Additionally, a number of traditionally "high wage earner" tax preference items, like stock options, became more popular with middle class taxpayers. By 1970, more than 19,000 taxpayers were affected by the tax.