Skip to content

Schakowsky Proposes Higher Tax Rates for Very High Earners

1 min readBy: Joseph Bishop-Henchman

Rep. Jan Schakowsky (D-IL), most recently a member of the President's Deficit Commission, has introduced legislation to impose higher income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. rates on very high earners. The new rates under her proposal would be:

Income Bracket Marginal Income Tax Rate
>$1 million 45%
>$10 million 46%
>$20 million 47%
>$100 million 48%
>$1 billion 49%

Such huge rates on high incomes raises less than one might expect: $78 billion, compared to $956 billion for the rest of the income tax as a whole this year. Coupled with state income taxes, the marginal tax rateThe marginal tax rate is the amount of additional tax paid for every additional dollar earned as income. The average tax rate is the total tax paid divided by total income earned. A 10 percent marginal tax rate means that 10 cents of every next dollar earned would be taken as tax. for these individuals would mostly be over 50%. More partnerships and limited liability corporations, many of which are taxed at the individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. rate, would end up paying rates higher than they would under the uncompetitively high-rate corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. .

As the reaction to the Deficit Commission's report suggests, many on the left of the political spectrum measure tax code progressivity solely by what the top rates are. The fact that myriad deductions and credits go primarily to high-income earners, making the top rate a bit less important for those who can figure out how to game the tax code, doesn't seem to factor into the equation.

Schakowsky's bill is co-sponsored by Reps. Raul Grijalva (D-AZ), Rep. Keith Ellison (D-MN), Jesse Jackson, Jr. (D-IL), Rep. Donna Edwards (D-MD), Rep. Bob Filner (D-CA), Rep. Jerry Nadler (D-NY), Rep. Steve Cohen (D-TN), Rep. John Yarmuth (D-KY), and Rep. Peter DeFazio (D-OR).