(FORTUNE Magazine) – "The hardest thing in the world to understand," said Albert Einstein, "is the income tax." Had he lived to see the alternative minimum tax, circa 2002, he might have found it even harder to understand why this bungled, wrong-headed tax wasn't repealed long ago. Originally designed in 1969 as a modest add-on tax to ensure that a few hundred uber-rich individuals couldn't use loopholes to get out of paying taxes, the AMT has grown into a parallel tax system that vastly increases the complexity of the tax code. If you think it doesn't concern you, read on.

The AMT ordains that if individuals or corporations are able to reduce their taxes sufficiently--by using the very credits, deductions, and exemptions that Congress has written into the tax rules--those rules are trashed and a different set applies. For individuals the AMT disallows or limits the child credit and deductions for such things as state taxes, medical expenses, and capital gains. Corporations lose many deductions for depreciation, research, and foreign taxes. Supporters of the AMT say it prevents abuse of the tax code and, by ensuring that wealthy people and corporations can't escape the income tax no matter what, is an important symbol of tax fairness.

Corporate America has strained under the AMT's burden for 15 years--especially companies in capital-intensive industries and those with large overseas operations. A study by DRI/McGraw-Hill in 1995 estimated that without the AMT, corporations' cost of capital would have been 10% lower over the next ten years. Complying is costly too--especially compared with the amount of money the AMT generates. Corporations spent an estimated $40 billion on tax compliance in 1999, $7 billion of which was for the AMT. The year before that, the government collected $188 billion in total corporate income taxes; a mere $3.4 billion came from the AMT.

For individuals the fun is just beginning. About 1.4 million taxpayers were subject to the AMT in 2000, up from about 132,000 in 1990. In a tangle of unintended consequences--partly because the AMT is not indexed for inflation, partly because last year's tax cuts didn't change the minimum tax rates--over the next several years the AMT will ensnare millions of taxpayers with incomes as low as $75,000. By 2010 a third of all taxpayers--more than 35 million--will be subject to the AMT, according to the Treasury Department.

What can they look forward to? After calculating your regular income tax, you're supposed to complete a 13-line worksheet. If it indicates that the AMT might apply to you, you get to fill out a two-page, 54-line worksheet that recalculates your taxes under the AMT, minus all those deductions, credits, and exemptions you thought you had coming. If you owe more under this formula, you file an AMT return.

All that has made the AMT extremely unpopular. Trade associations of accountants, lawyers, and tax executives--even the IRS's own National Taxpayer Advocate--have been urging its repeal for years. So why don't we just get rid of it?

Like it or not, Congress will be forced to fix the individual AMT within the next year or two. If 35 million Americans become subject to the perverseness outlined above, we're likely to see the biggest tax revolt since the Boston Tea Party. But left to its own devices, Congress will probably only trim the list of disallowed deductions or raise the AMT exemption.

Fixing the corporate AMT is far less certain. Congressional Republicans have tried to repeal it, most recently as part of the original economic-stimulus bill last fall, but they got their clocks cleaned in the public-relations battle. Corporations that pay the AMT (including companies that must pay the AMT even when they report net losses) get a refundable tax credit. They get the money back if their regular taxes rise in the future. In the House Republicans' AMT repeal, some $25 billion in outstanding AMT credits would have been refunded to companies. Democrats successfully characterized it as a giveaway to big business. Republicans seemed powerless to explain why that wasn't really right, and the effort died in the Senate.

The entire AMT snafu speaks to a larger point: The U.S. tax code is a mess, and it's getting worse every year. If the gallimaufry of deductions and exemptions enables people and companies to escape tax liability, there's something wrong with the deductions and exemptions themselves--and the system that created them.

What we need is a fundamental reform of the tax code--something exceedingly unlikely to happen given the partisan standoff that's going on in Washington. What we're likely to get, instead, is more legislative duct tape and baling wire that will make the tax code even more of a mess.

ROB NORTON, a former FORTUNE executive editor, is a freelance writer, editor, and consultant in New York City. He can be reached at rob@robnorton.com.