Schakowsky Proposes Higher Tax Rates for Very High Earners

March 22, 2011

Rep. Jan Schakowsky (D-IL), most recently a member of the President's Deficit Commission, has introduced legislation to impose higher income tax 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 rate for these individuals would mostly be over 50%. More partnerships and limited liability corporations, many of which are taxed at the individual income tax rate, would end up paying rates higher than they would under the uncompetitively high-rate corporate 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).

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