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Tax increases on the wealthy?

By Kay Bell · Bankrate.com
Thursday, March 17, 2011
Posted: 10 am ET

Last December as Congress was debating what to do about expiring tax laws, a CBS News poll found that 73 percent of Americans believed the budget deficit was a very serious problem.

How did more than half of those surveyed suggest reducing the deficit? By letting the Bush-era tax cuts for those in the higher income tax brackets expire.

What did Congress do? Lawmakers opted to extend the tax cuts for all, including the wealthy, even though the continued tax breaks add billions to the deficit.

Now 10 Democratic representatives have decided it's time to revisit the upper income tax rates.

Rep. Jan Schakowsky, D-Ill., is the lead sponsor of the Fairness in Taxation Act. She proposes the following income tax rates:

  • 45 percent on incomes between $1 million to $10 million.
  • 46 percent on incomes between $10 million and $20 million.
  • 47 percent on incomes between $20 million and $100 million.
  • 48 percent on incomes between $100 million and $1 billion.
  • 49 percent on incomes of more than $1 billion.

Schakowsky's bill would also tax capital gains and dividend income as ordinary income for taxpayers with income over $1 million. 

The 2011 top tax rate is 35 percent on earnings of more than $379,151 ($189,576 for married taxpayers filing separate returns). The top tax rate on most long-term capital gains and qualified dividends is now just 15 percent.

While Schakowsky's bill has generated some support from progressive public action groups, she faces a challenge to move it in the House of Representatives. Rep. Dave Camp, R-Mich., the chairman of the tax-writing Ways and Means Committee, wants to cut the top tax rate to 25 percent for individuals and corporations.

But both proposals could at least be starting points on the larger issue of comprehensive tax reform. That's what many folks, including myself, see as the eventual answer to deficit reduction.

Make sure you get all the latest tax news and tips this filing season by subscribing to Bankrate's free Daily Tax Tip newsletter.

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4 Comments
FrankoFreedom
March 23, 2011 at 7:43 am

/1\
Re. earlier comment - some only pay on 50% of "benefit" checks. It should be 50% for everyone if at all.
Taxes are imposed on up to 50 percent of benefits for single retirees with modified adjusted gross incomes over $25,000 and for
couples with incomes over $32,000.
Single retirees with incomes above $34,000 and couples with
incomes over $44,000 must pay taxes on up to 85 percent of their
incomes above this threshold.

PAUL
March 19, 2011 at 3:18 pm

I don't make even close to a million/year, but I don't think taxing the wealthy at a high rate makes sense. If I make $100,000/year, and someone makes a million, if we are taxed at the same rate, he will pay ten times what I do. IT'S A PERCENTAGE!

Shantique
March 18, 2011 at 6:49 am

CRAZY! 45% for 1mil-10mil...do these people not realize how many small business fall into this category!

Because someone has done well they are supposed to give HALF of their income to government (actually way more bc this is just Fed...does not include state, local, property and sales tax). A government that wants to collect these ridiculous taxes, bc they just keep spending and spending!

While the regular tax-paying citizens are all tightening their belts, the government just keeps going deeper and deeper into t=debt. Collecting more revenue is not going to help anything if you don't limit the spending.