The Wall Street Journal has a good post on this.
The Cato Institute has a more pessimistic take. Their contention is that Bush wants to do something about the AMT and he will agree to a tax increase to get it.
Assuming asuch a deal could be brokered, I would still support it, the massive raise in FICA payroll taxes on the upper income notwithstanding.
The AMT was originally intended to target 155 high-income households that were taking advantage of so many tax benefits that they wound up paying little or no income tax under the tax code of the time (1970). However, with rising nominal wages and inflation, many millions of middle class taxpayers now end up having to deal with it.
Moroever, why SHOULDN'T people take advantage of the rules to pay no taxes if they wish? They are following the rules, aren't they? If some guy so badly wants to not pay taxes that he puts all his interest earning into tax free municipal bonds, that's his business. The returns on Muni Bonds are much lower than other investments even if they are tax free, mind you.
Oh but that is unfair because he is super-rich, you say? Exactly who would you prefer to own state and local government debt? Wealthy Americans or wealthy foreigners? Wealthy Americans or the Chicom government officials? (take at look at who increasingly owns our Treasury bonds some time...)
The AMT is grossly unfair, in that it penalizes people who in good faith obeyed the tax laws and went into tax shelters only to discover that at a certain level of wage income, or capital gains (which are always hard to predict, and capital losses from prior years are not allowed to offset), or even if the moon isn't quite right (just kidding, but just barely), suddenly their tax shelter is no longer valid, the previously understood tax laws no longer apply and the AMT shark comes in to take a bite.
The AMT is also utterly arcane and cumbersome. Even most people who prepare taxes FOR A LIVING don't fully understand it, or exactly where and when it kicks in.
While greatly increasing the 6.2% FICA "wage cap", which is now at $94,200 of wages for tax year 2006 and is indexed for cost of living adjustments, or even eliminating the cap and taxing FICA just like Medicare (which is taxed at 1.45% with no wage limit) would amount to a huge tax increase for high income earners, I have to admit that getting rid of the AMT in return would also amount to a huge tax cut for most of these same wage earners, and more importantly the tax code would be fairer, simpler and more easy to understand!!!
Getting rid of the FICA cap would also end the farce that "Social Security" (sic) was intended to "provide for everyone" and make people more aware that it is REALLY just income redistribution and "welfare for the old" plain and simple.
(Of course, that assumes that a fair political deal would be brokered, and given deceptive Demunists of the Evil Party and gullible Republicans of the Stupid Or Gutless Party, I'm not confident of that.)