WASHINGTON — When it comes to reducing the deficit, much of the talk on Capitol Hill has focused on cutting spending. However, Rep. Keith Ellison and a small group of progressive Democrats today introduced another option: Increase tax rates for millionaires and billionaires.
Federal income tax is taken progressively across tax brackets, with tax rates increasing as income rises. The top tax bracket of 35 percent ends at $373,000, currently not differentiating between those who can buy a nice house on a golf course and those who can buy a golf course, and between those who can fly first class between here and Minneapolis and those who have their own jet waiting on their whims.
The newly added tax brackets would be:
• $1 million to $10 million: 45 percent
• $10 million to $20 million: 46 percent
• $20 million to $100 million: 47 percent
• $100 million to 1 billion: 48 percent
• $1 billion and above: 49 percent
In addition, capital gains and dividend income, normally taxed at a lower rate of 15 percent, would be taxed as regular income for those making more than $1 million a year. The plan would raise an estimated $78 billion a year.
"Our great country has made a way for people to make fortunes, and that's a good thing," Ellison said, listing off public schools, national defense, patent and copyright protections, law enforcement and other guarantees of a secure society provided by the government. "I think that for all that, patriotic Americans would not mind paying their fair share."
While it's a different plan, the basic idea of asking the top-tier earners is not dissimilar in political theory from what Gov. Mark Dayton has proposed in Minnesota. And the reaction from Republicans here is likely to be the same as it was in Minnesota.
Leaders in Minnesota basically declared Dayton's tax-the-rich plan dead on arrival. And on Capitol Hill in the closing months of 2010, the White House and Democratic leaders couldn't find a way to temporarily extend the Bush tax cuts without extending the cuts for the top 2 percent. Simply put, they didn't have the votes.
This proposal is meant to add revenue increases to the list of things acceptable within the deficit-cutting conversation, Ellison said. "We're trying to inject it into the public debate."
Rep. Jan Schakowsky of Illinois, who introduced the legislation, said the plan from here is to try and galvanize support around the idea of making millionaires and billionaires pay more, and to directly contrast her plan with cuts to programs that primarily affect lower-income people, such as Head Start or community health centers. Later today, Ellison will do that with a pair of amendments blasting GOP-backed cuts to neighborhood stabilization programs.
And it's possible that Dems could, with a little more momentum, try to force a vote on their plan, or at least demand that Republican leaders swallow this tax hike in exchange for some of the deeper cuts they want.
"It would put people in a very difficult position," said Rep. John Yarmouth of Kentucky, noting that Republican colleagues told him last year that they couldn't not vote for a tax hike on only those making $1 million or more, "I'd be interested to see what would happen."
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