Read the CBO report "An Update to the Budget and Economic Outlook: 2012-2022" and answer the following questions. Be sure that you are able to differentiate the reports "Baseline Projections" from the "Budget Projections under Alternative Scenarios." Limit your responses to each question to one short paragraph.
1. Using the tax evaluation criteria for economic efficiency and equity discussed in class, evaluate the effect of the expiration of the tax rate deductions, expanded deductions and expansion of tax credits described in the report.
2. Describe and contrast the deficits projected under the baseline and alternative fiscal scenario (summarized in Table 1-6) and the implications of the projections based on the CBO report.
3. What is the Alternative Minimum Tax (AMT) and what is its purpose?
4. What does indexing the AMT for inflation do for the revenue raising capacity of the income tax?