Editor's Note: Reason columnist and Mercatus Center economist Veronique de Rugy appears weekly on Bloomberg TV to separate economic fact from economic myth.

Myth 1: The Alternative Minimum Tax targets millionaires.

Fact 1: While the Alternative Minimum Tax was originally created to target millionaires, today it falls most heavily on non-millionaires.

The Alternative Minimum Tax (AMT) was created in 1969 to prevent 155 wealthy taxpayers from using deductions and credits to avoid paying any federal income taxes.

Here's how it works. Taxpayers who are subject to the AMT must calculate their tax liability twice, once under regular income tax rules and again under AMT rules. If liability under the AMT proves higher, taxpayers pay the difference as an add-on to the regular tax. The difference paid is their AMT.

However, mainly due to the failure to index the AMT for inflation in 1981 when the regular income tax was indexed, the reach of the AMT has expanded over time to hit middle-income people it was never intended to tax. As a result, the AMT impacts a growing share of the population. According to the Congressional Budget Office, last tax season 4.5 million taxpayers were affected by the alternative minimum tax, an increase of over 4 million taxpayers since 1970.

Until 2000, less than 1 percent of taxpayers paid the AMT in any given year; by 2008, 3 percent of taxpayers were subject to the AMT. And its costs go far beyond increased tax liabilities.

This chart shows the composition of taxpayers affected by the Alternative Minimum Tax in 2009 by adjusted gross income (AGI), using data from the 2010 CBO Brief, "The Individual Alternative Minimum Tax."

As you can see, the AMT hits far more than the highest-income individuals. In fact, only 10 percent of AMT revenue came from taxpayers making above $500,000 and only a fraction of those people are millionaires.

Also, the majority of AMT revenue came from taxpayers in the $200,000-$500,000 (in 2009 dollars) income range while some 5 percent of revenue came from taxpayers making less than $100,000.

As we see, 23 percent of AMT revenue came from taxpayers with income between $100,000 and $200,000.

This evidence stands in sharp contradiction with the original purpose of the AMT, which was to prevent 155 millionaires from using deductions and credits to avoid paying any federal income tax.

Myth 2: The AMT is family friendly.

Fact 2: Households with three or more children are four times more likely to pay the AMT than households with zero children.

The AMT disallows certain tax breaks, especially state and local tax deductions and the personal exemption. As a result, the AMT hits some taxpayers harder than others. Married couples with children and taxpayers in high-tax states are disproportionately hit by the AMT.

This chart compares AMT liability among taxpayers based on the number of children in their households in 2010, using data from the Tax Policy Center's "Characteristics of AMT Taxpayers." The number of children is defined as the number of exemptions taken for children living at home. As the numbers show, an increase in the number of children in a household was accompanied by an increase in the AMT liability. Thus 8.6 percent of households with three or more children had liability under the AMT. Essentially, if you have three or more children you pay over four times the amount of people who have no children.

Myth 3: The Republicans are the only party strongly opposed to the AMT.

Fact 3: While Republicans would be happy to repeal the AMT, Democrats are also opposed to it. That's because almost 50 percent of AMT revenue comes from four Democratic strongholds: California, Massachusetts, New Jersey, and New York.

The AMT hits some taxpayers harder than others, especially those who would otherwise claim large deductions for their state and local taxes.

This chart illustrates the proportion of AMT payers in various states using data from the Tax Policy Center ("Alternative Minimum Tax by State, Tax Year 2008"). Nearly 48 percent of the total revenue from the AMT is collected from just four states–California, Massachusetts, New Jersey, and New York–amounting to one-twelfth of all states. The remaining 52 percent is shared by the rest of the country.

Nearly half of all states pay less than 0.7 percent of total AMT revenues each, but in California taxpayers who paid the AMT made up 22 percent of total AMT revenues, while 15.5 percent of AMT revenues came from New York, 7 percent from New Jersey, and 3.5 percent from Massachusetts. The bottom line is that the AMT hits people in some states harder than others.

This is why Democrats such as Rep. Charles Rangel (D-N.Y.), are so upset about the AMT. The tax hits liberal states the hardest.

In addition, taxpayers also have to deal with what's called the "real bracket phenomenon." Bracket creep occurs when people experience an increase in wages, salary, or other income that moves them from one tax bracket to the next highest bracket. For instance, because the AMT isn't indexed for inflation, growth in nominal income tends to raise the AMT liability more than regular income tax liability. This phenomenon is especially pernicious in places with a high cost of living like New York City, where some employers offer generous salaries to offset sky-high rents and other city-related costs. Since the inflation index used to set the brackets does not appropriately take these localized costs into account, the more people earn to make up for the high cost of living, the more likely they are to be hit by the AMT.

Contributing Editor Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

Editor's Note: This article originally misstated the percentage of AMT revenue coming from taxpayers making between $100,000-$200,000 annually.