As the debate about the deficit continues, some lawmakers are again talking about raising the income tax rate on the wealthy.
The latest proposal is the Fairness in Taxation Act, introduced by Rep. Jan Schakowsky, D-Ill. The measure would significantly hike the taxes paid by millionaires and billionaires.
Those rich folks now pay taxes at a 35 percent rate. Under Schakowsky's bill they'd pay the IRS
- 45 percent on incomes of $1 million to $10 million.
- 46 percent on incomes of $10 million and $20 million.
- 47 percent on incomes of $20 million and $100 million.
- 48 percent on incomes of $100 million and $1 billion.
- 49 percent on incomes of more than $1 billion.
Schakowsky also wants to eliminate the favorable capital gains and qualified dividends tax rates for those making at least a milllion a year. Her bill would tax these investment earnings as ordinary income.
If enacted in 2011, the Congresswoman estimates the new tax rates would bring the Treasury more than $78 billion. Heck, the tax revenue might even be more since the number of millionaire households in the U.S. rose for the second straight year in 2010.
These numbers are interesting to ponder. But don't look for the Fairness in Taxation Act to go anywhere, fast or slow.
All of the cosponsors of this latest call to hike taxes on the wealthy are Democrats. Republicans are in control of the House. The Ways and Means chairman is even floating a proposal to lower the top tax rate to 25 percent.
Sure, all tax proposals are being tossed out there, informally and officially, as part of deficit reduction efforts or even comprehensive tax reform.
But the more likely scenario is tax gridlock, with the extended tax cuts enacted last December staying in place until Dec. 31, 2012, safely after the next general election.
Related posts:
- Merry Taxmas! Bush-era tax cuts etended
- 2010-2011 tax rates, income brackets
- The future of capital gains taxes
- Dividend tax possibilities
- Deficit commission tax overhaul, take 2
- Up next for Obama: Tax system overhaul
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Scott
I’m just having my first cup of coffee now, but I think Jan’s math is wrong. If they increased the rate from 35% to 49% for just one person who earned over a billion, that would generate $140mm in additional tax revenues. Perhaps Jan needs to stay away from taxes.
Aious
The economy has forced us to make very strained decisions
We have cut A LOT and still are left short
Taxing the rich is a logical next step that will see the lower/middle class barely get by with the upper class living the same as it ever was
Devin
The other articles I’ve seen on this put the estimate at $79 Billion, not million, I think it’s just a typo in this blog.
Kay
Scott and Devin, sorry about that. It was a typo. Have corrected estimated savings to $78 BILLION. Thanks!
JoeTaxpayer
I believe the use of the word “fair” and “taxation” in the title of a bill is an oxymoron. If not, it at least reminds me of Orwell’s 1984.
It’s easy to suggest we tax the heck out of the rich. Yet, it’s just as easy for them to move to a less taxing country. You see, it’s not that I have sympathy for the guy pulling down $1M+, I think he should be able to budget just fine. But when I hear rates pushing 50%, I know the system itself won’t adjust, tax revenue won’t rise. Ever hear of the Laffer curve?