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.
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.
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- 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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