The millionaires tax recently proposed by Senate Democrats would hit taxpayers in Democratic-dominated states almost twice as hard as those in Republican-dominated states.
According to an analysis by The Daily Caller (www.dailycaller.com), “states that have elected two Republican senators tend to have much lower levels of economic inequality than states which have elected two Democratic senators. Democrat-dominated states tend to have higher percentages of very rich people, higher percentages of very poor people, and a lower percentage of middle-income people.” The analysis concluded that 0.29 percent of taxpayers in the 18 states that elected two Democratic senators would be taxed under the proposed law compared to only 0.17 percent of taxpayers in the 15 states that elected two Republican senators. Reportedly, 1.2 percent of taxpayers in Connecticut would be affected by the tax.
The tax would impose a 5.6 percent surtax on taxpayers whose income is more than $1 million per year — hence its name. Because the tax would be imposed on sources other than salaries and wages (investment income such as capital gains and dividends would be included and many deductions would be eliminated), it would result in a greater tax burden than at first glance. This is true because it would apply to a modified adjusted gross income (MAGI) formula not taxable income. CNNMoney.com citing the Tax Policy Center estimates that the average tax burden would be $110,467 per year for this class of taxpayer.
According to IRS statistical data for 2009, only 236,883 taxpayers who filed returns for that year had an adjusted gross income of over $1 million. Thus, it is estimated that only a small fraction of the taxpaying public (maybe as low as 0.2%) would be affected by the tax.
The millionaires tax was originally proposed to pay for President Obama’s jobs plan. If passed, the tax would go into effect on January 1, 2013. According to the Congressional Budget Office, it would raise $452.7 billion over ten years, more than enough to pay for the $447 billion in spending and tax cuts included in the president’s plan. It is just the latest proposed tax tinkering to increase spending or to reduce the deficit. An earlier proposal would have limited tax deductions for those earning $250,000 or more. Neither proposal was part of a comprehensive tax reform so desperately needed by a complex and — at times — incomprehensible US tax code. The last comprehensive revision of the code was in 1986.
