What does the Alternative Minimum Tax (AMT) ensure for high-income earners?

The Alternative Minimum Tax (AMT) is designed to ensure that high-income earners pay a minimum level of tax, regardless of the deductions and credits they may qualify for under the regular tax system. The AMT operates by adjusting or adding back certain tax preferences and deductions that are typically available, which can result in a higher taxable income for individuals who would otherwise benefit from significant tax breaks. This mechanism prevents wealthy individuals from significantly reducing their tax liability through excessive deductions, thus upholding the principle that all taxpayers should contribute a fair share of taxes. By establishing a baseline tax obligation, the AMT ensures that even those with substantial income and potential deductions cannot escape taxation entirely, fulfilling its purpose of maintaining tax equity among higher earners.