NCPA - National Center for Policy Analysis


June 14, 2007

Last week, Democrats on the House Ways and Means Committee released a draft of their tax plan that would raise the highest income tax rate by 4.3 percentage points to 39.3 percent immediately.  And because the proposal doesn't extend the Bush tax cuts, the highest income tax rate would rise to the neighborhood of 44 percent after 2010; this would lift the top federal income tax rate higher than it was even under Bill Clinton, says the Wall Street Journal.

Moreover, families with incomes between $250,000 and $500,000, the "marginal" tax rate paid on the next dollar of earned income could soar to 80 percent, or in some cases even above 100 percent.  The point of this revenue grab is to pay for making families with earnings under $250,000 a year exempt from the Alternative Minimum Tax (AMT):

  • Without legislation this year, the number of Americans who pay the AMT will rise as much as six-fold to 23 million.
  • Even those with incomes as low as $60,000 could pay the AMT in some high-tax states.
  • Maryland's Chris Van Hollen, chairman of the Democratic Congressional Campaign Committee, has said his party risks a tax revolt in 2008 without some kind of AMT patch.

So Democrats are proposing to raise taxes on three million Americans in order to exempt 20 million from the AMT, says the Journal:

  • The wealthiest 1 percent of Americans already pay more than one of every three income tax dollars into the Treasury.
  • Under the Ways and Means proposal, the share of all income taxes paid by the top 1 percent would rise to nearly 40 percent.
  • The top 2 percent would pay roughly as much as the bottom 98 percent of all taxpayers.

Source: Editorial, "100% Marginal Tax Rate," Wall Street Journal, June 14, 2007.

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