Illinois Congresswoman proposes tax hike on wealthyon April 28th, 2011 at 6:00 am
New tax brackets and slightly higher taxes on the rich – could result under a proposal in the House introduced last month by an Illinois Congresswoman.
U.S. Rep. Jan Schakowsky (D-IL), a member of President Obama’s 18-member Fiscal Commission, introduced the Fairness in Taxation Act of 2011, which would raise the top tax rate from 35% to 49% for billionaires and also tax capital gains and dividend income as ordinary income for taxpayers with income over $1 million.
“It’s time for millionaires and billionaires to pay their fair share,” Schakowsky said. “This isn’t about punishment or revenge. It’s about fairness. It’s about avoiding budget cuts that harm middle-class families and those who aspire to it. We can choose to cut education, job creation and health care, or we can choose to ask those who can contribute more to do so.”
The top tax bracket now starts at $373,000 in income and doesn’t distinguish between that level and the super-rich – like the top 20 hedge fund managers whose average income last year was over $1 billion, according to the Boston think tank United for a Fair Economy (UFE).
So Schakowsky’s bill would set up new tax brackets for incomes starting at $1 million. They would become: $1–10 million: 45%; $10–20 million: 46%; $20–100 million: 47%; $100 million to $1 billion: 48%; and $1 billion and over: 49%.
If enacted this year, the Fairness in Taxation Act would raise more than $78 billion, UFE estimates.
The bill’s 13 co-sponsors include co-chairs of the Congressional Progressive Caucus, U.S. Reps. Raul Grijalva (D-AZ) and Keith Ellison (D-MN), plus U.S. Rep. Jesse Jackson, Jr. (D-IL).
It’s also supported by progressive millionaires, economic-justice advocacy groups – and the American people. According to an NBC/Wall St. Journal Poll last month, 81% of Americans favor reducing the budget deficit by putting a surtax on federal income taxes for those making more than $1 million per year, and ending tax deductions for oil companies.
“I think very wealthy people like me should pay substantially higher taxes, since we have done exceedingly well in the last few decades,” said Katharine Myers, a Pennsylvania millionaire whose income comes from royalties from the Myers-Briggs personality test, created by her mother-in-law.
“Our taxpayer-funded government contributed to my success,” added Myers, a supporter of UFE and its Responsible Wealth project.
Several citizen advocacy groups announced their support of the bill, which was referred to the Republican-controlled Ways & Means Committee, whose membership includes U.S. Rep. Aaron Schock (R-Peoria)
“Congresswoman Schakowsky has shown that there is another way,” said Steve Wamhoff, a tax expert from Citizens for Tax Justice, which endorsed the proposal, along with Citizen Action Illinois, Campaign for America’s Future, and Wealth for the Common Good. “Millionaires have benefited disproportionately from the tax cuts enacted over the past decade, so it seems entirely reasonable that they share in the sacrifices needed to get our fiscal house in order.”
In the Senate, U.S. Sen. Bernie Sanders (I-Vt.) has a similar measure – along with estate tax reform.
“During the last 15 years, while enormously rich people became much richer, their effective tax rates were slashed almost in half,” Sanders said. “While the highest paid 400 Americans had an average income of $345 million in 2007, as a result of Bush tax policy they now pay an effective tax rate of 16.6%, the lowest on record. Last year, the top 25 hedge fund managers made a combined $25 billion but because of tax policy their lobbyists helped write, they pay a lower effective tax rate than many teachers, nurses and police officers. Warren Buffett, one of the richest people on earth, has often commented that he pays a lower effective tax rate than his secretary.
“The rich are getting richer; the middle class and poor are getting poorer,” Sanders continued. “The effective tax rate today of the wealthiest people in this country is lower than it’s ever been in recorded history in our country.’
Sanders would impose a 5.4% surtax on millionaires that would yield up to $50 billion a year, eliminate tax loopholes for big oil companies, and also re institute an estate tax.
“The Responsible Estate Tax Act would raise $318 billion over the next decade by establishing a graduated inheritance tax on estates over $3.5 million retroactive to this year,” Sanders said. “This bill ensures that the wealthiest 0.3% of Americans pays their fair share of estate taxes, while making sure that 99.7% of Americans never have to pay a dime when they lose a loved one. It also makes certain that the overwhelming majority of family farmers and small businesses never have to pay an estate tax.”