Rep. Schakowsky Introduces Legislation to Raise Taxes on Millionaires and Billionaires

Yesterday Rep. Jan Schakowsky (D-IL) introduced a proposal to raise federal taxes for very high-earners - The Fairness in Taxation Act. The proposed legislation enacts new tax brackets for income starting at $1 million and ends with a $1 billion bracket. The legislation also taxes capital gains as ordinary income for individuals with an annual income of over $1 million. According to Rep. Schakowsky’s press release, the tax increase would raise $78 billion if enacted this year. The new high-earner tax brackets would be:

Income Current Marginal Tax Rates Proposed Marginal Tax Rates
$1 million to $10 million 35% 45%
$10 million $20 million 35% 46%
$20 million to 100 million 35% 47%
$100 million to $1 billion 35% 48%
$1 billion and above 35% 49%

In her press release, Rep. Schakowsky states:

"In the United States today, the richest 1% owns 34% of our nation’s wealth – that’s more than the entire bottom 90%, who own just 29% of the country’s wealth. And the top one-hundredth of 1% now makes an average of $27 million per household per year. The average income for the bottom 90% of Americans? $31,244. It’s time for millionaires and billionaires to pay their fair share, which is why I introduced the Fairness in Taxation Act. This isn’t about punishment or revenge. It’s about fairness. It’s about avoiding budget cuts that harm middle class families and those who aspire to it. We can choose to cut education, job creation and health care, or we can choose to ask those who can contribute more to do so."

Sen. Sanders (I-VT) also recently introduced legislation to raise taxes on high-earners. We commend both him and Rep. Schakowsky for putting proposals to reduce the deficit on the table. Rep. Schakowsky also put forth her own comprehensive fiscal reform plan when she declined to support the final report of the President's Fiscal Commission. If more lawmakers offered viable alternatives to proposals they criticized, our fiscal future would probably look a lot brighter than it does right now.

That being said, it's important to note that we can’t stabilize our debt by raising taxes on high earners alone. A paper by the Tax Policy Center in January 2010 found that to bring the deficit down to 2 or 3 percent of GDP by 2019 - if we kept other rates at their current levels - the top tax rate would need to be as high as 77 percent. There are also the potential economic effects of higher taxes to consider (although this is true of any fiscal consolidation plan), and the fact that many taxpayers would just use new and existing ways to hide their income.

A comprehensive reform package that would meaningfully improve our fiscal outlook will have to include broad-based tax reform for the majority of Americans. (Click here to read our ideas on tax expenditures.) It will also have to take a hard look at spending in all areas of the budget, especially in our entitlement programs. The sooner policymakers confront our challenges, the better. The longer we wait, the more we put the most vulnerable in our society at risk and the less amount of time we will have to make adjustments to spending and tax levels.