off the charts
BEYOND THE NUMBERS
BEYOND THE NUMBERS
The new tax plan from Senators Mike Lee (R-UT) and Marco Rubio (R-FL) builds on Senator Lee’s 2014 plan and creates something that’s even more tilted — outrageously so — in favor of the country’s highest-income people and likely much more fiscally irresponsible. And, like last year’s plan, it not only excludes most working-poor families from its new child tax credit but allows much of their existing child credit to disappear after 2017. Last year’s plan lost $2.4 trillion of revenue over the first decade and gave its largest tax cuts, both in dollars and as a share of after-tax income, to people making more than $1 million a year, the Urban-Brookings Tax Policy Center found. The new plan essentially takes the old plan (which set tax rates of 15 and 35 percent and eliminated many deductions as well as the individual and corporate alternative minimum taxes) and adds more tax cuts for those at the top. To understand their impact, it’s helpful to grab a copy of the IRS’s tax information on the country’s richest 400 filers:
- Eliminating taxes on capital gains and dividends. The plan would do away with taxes on capital gains and dividends, even though they are already taxed at lower rates than wages and salaries. And the benefit would flow overwhelmingly to those with the highest incomes. In 2012, more than 10 percent of capital gains went to the top 400 filers, who collected an average of $230 million apiece (or $92 billion total). This tax cut would also encourage wealthy people to use tax schemes to convert ordinary income into this newly tax-free income.
- Cutting taxes on “pass-through” businesses. The plan would tax all partnerships and S corporations, whose earnings are “passed through” to owners and taxed at the individual rather than corporate level, at a special 25 percent rate. Like capital gains and dividends, pass-through income is heavily concentrated at the top: the top 400 filers had $18 billion of it in 2012, an average of $84 million apiece. With this tax cut, the tax rate on pass-through income would be ten percentage points lower than a family with taxable income of $160,000 would pay on its salary.
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