Democrats Introduce a Federal Tax Reform Package

Depending on how you look at this bill, Democrats in the Senate and House are either wanting go give tax relief to low income earners or they are wanting to go after high-income earners and make them pay their “fair share.”

Or maybe both.

That said, Senate Democrats Chris Van Hollen, Mark Kelly, Kirsten Gillibrand, Cory Booker, and Andy Kim have introduced a tax reform bill that will — if passed — give major tax relief to over 130 million Americans.

A similar bill has been introduced in the U.S. House of Representatives by Rep. Don Beyer.

The sponsors of the Working Americans' Tax Cut Act say idea is to align the nation’s tax system with the actual cost of living. Thus, it ties individual and family tax liabilities to the actual living costs of with those with lower incomes. The plan is to ensure people earning incomes near, or below, the basic cost of living are not taxed on income needed for the essentials of life.

"Far too many Americans are working hard for their paychecks but still having trouble making ends meet,” Sen. Van Hollen said. “Our bill would ensure just that — and it would provide a significant tax break to millions of other working Americans, so folks can keep more of their hard-earned money in their pockets.”

If passed, these are the highlights:

• People earning around $46,000 will owe no federal income tax
• That is the figure estimated to the be the annual cost of living for a single adult
• Incomes between $46,000 and $80,500 will see taxes reduced through a “phase system”
• Heads of households get a higher exemption of about $64,000
• Married couples filing jointly are exempt up to $92,000
• So a single person earning $50,000 a year will see a $2,800 tax cut
• Families of four with $95,000 in income will see a tax cut of about $6,000

As income levels rise, the benefits gradually phase out:

• They top out at about $80,500 for an individual
• Heads of households threshold is $112,700
• Married couples top out at $161,000

Millionaires, billionaires and people with very high incomes are going to see higher taxes if the Working Americans' Tax Cut Act becomes law. The bill includes:

• A 5% surtax on income above $1 million for individuals
• A 5% surtax on income for couples making $1.5 million
• A 10% surtax on income for individuals making above $2 million
• A 10% surtax on income of couples making $3 million
• A 12% surtax on income for individuals making above $5 million
• A 12% surtax on income for couples making $7.5 million or more

And the surtaxes will apply to all wages and investment income. It will raise an estimated $1.46 in taxes over the next 10 years. The Yale Budget Lab estimates the surtaxes will apply to 615,000 people.

Several groups are backing the bill:

• The AFL-CIO
• The American Federation of Teachers (AFT)
• The National Education Association (NEA)
• Americans for Tax Fairness
• Oxfam US
• Public Citizen

Supporters are glowing with optimism but reality says this one has a difficult path through Congress.

Source link: Finance Buzz — https://bit.ly/4ttm07t