In case you've been living under a rock in the past 24 hours, MSNBC's Rachel Maddow released two pages of President Donald Trump's 2005 tax return Tuesday evening.
Just before the release, the White House issued a statement confirming some of the details, including that Trump paid the IRS $38 million on an income of $150 million in 2005.
But a closer study of the return reveals that the effective 24.5 percent tax rate Trump paid in 2005 was the result of the alternative minimum tax (AMT) – a tax rule he wants to get rid of – and that without it his final tax bill would have been around $7 million, according to Business Insider.
What is alternative minimum tax?
The AMT was introduced by Congress in 1969 as a way to prevent the nation's wealthiest from legally using deductions, tax shelters and other tax breaks to pay next-to-nothing in federal income taxes, according to TurboTax. This came after 155 of the nation's richest earners were found to have paid zero income tax.
It excludes many of the deductions, tax credits and tax-free expenses you can claim with regular income tax – for example, state and local taxes are no longer deductible and you don't get a "marriage bonus." If at the end of the calculation your AMT is higher than what you'd pay in regular income tax, you pay the 26-28 percent AMT tax rate instead.
Before your AMT is calculated, you are given an exemption based on how you're filing, which is designed to ensure lower earners don't get caught in the tax.
If you're single and your overall income was $100,000, you can subtract $53,900 before AMT is calculated – meaning you're more likely to pay regular income tax. If you're married filing jointly, you can subtract $83,800.
According to CNBC, any household with an income of more than $75,000 claiming at least one deduction, or any household with a $150,000 income regardless of deductions, should at least check if they are eligible for the AMT.
Who pays it?
Despite the above exemptions and the AMT's initial aim of targeting the super rich, the Tax Policy Center says upper-middle income earners – particularly those with many children as there are no exemptions for dependents – tend to be the ones who pay the alternative tax.
In 2016, about 2.2 percent of AMT taxpayers in 2016 earned less than $200,000, 30.3 percent earned $200,000-500,000, and 62.3 percent earned $500,000 to $1 million.
Those earning more than this tend not to pay AMT unless they're taking advantage of legal tax efficiency measures, as they will instead be paying the higher 39.6 percent federal income tax rate.
Trump's tax returns don't make it clear how he lowered his regular income tax liability to the point that it triggered AMT, but Time Money speculates he might have been able to deduct the declining value of assets that he owns and past business losses.
What are the complaints about AMT?
There have been growing complaints in recent years that more and more middle class earners were being snared by AMT because the exemptions created to ensure the tax only impacted the rich weren't linked to inflation.
In 1970, just 19,000 people paid AMT, CNBC notes. By 2011 this had risen to more than 4 million as the thresholds barely changed while people's earnings and assets rose considerably.
Congress changed this in 2013 so it now rises every year in line with inflation.
Nonetheless, it remains unpopular with those who have to pay it, particularly those at the lower end of the earning scale.
Among its opponents are the president himself, who in a 2016 campaign pledge said he wanted to create four income tax brackets and a new tax code that would eliminate, among other things, the AMT.
Bloomberg reports House Leader Paul Ryan is also in favor of repealing the AMT.
The Atlantic reports if Trump was successful in repealing the AMT, his effective tax rate in 2005 would have been about 4 percent.