by Dr. Roy Cordato
Senior Economist, Emeritas
I just came across this summary/comparison of the House and Senate’s tax reform/cut proposals published by Forbes. It is really quite good on laying out the details in a side by side approach, covering every aspect of the two pieces of legislation. To be quite frank, upon seeing the details of these proposals they are nowhere near as good as I have been thinking. Here’s one, of many, examples. In the House bill, for couples earning $1 million a year or more, the effective marginal tax rate will actually be 45.6%–a rate that President Obama couldn’t have dreamed of getting through.
The reason for this is that for those earning over $500,000 a year the statutory rate will remain at 39.6%. But once a couple’s income reaches a million dollars there is a claw back provision of the bottom 12% rate. This means these taxpayers lose any benefits from the 12% rate which, for a married couple would apply to the first $90,000. The lowest rate for couples earning over a million dollars won’t be 12%, it will be 25%. At the $1 million income level this would add almost $25,000 to a married couple’s tax bill. And it would go up from there. Punitive? I would say so.