Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Retirement Compounders®
  • Free Email Signup

Is the GOP About to Secretly Raise Taxes?

November 3, 2017 By Jeremy Jones, CFA

Image used under license from Shutterstock.com

Yesterday the Republican leadership unveiled their much anticipated tax cut plan to the world. It is very much still a work in progress. The plan has potential, but also contains flaws that could lead to it actually harming America’s potential for greater economic activity.

The GOP used to recognize that lowering the top marginal rate would result in a bigger economic-pie for all Americans to share. Now it seems the Republicans have been cowed into a fear of reducing taxes for “the rich” by the Elizabeth-Warrens of the world.

Politico reports that the Republicans writing the bill (aided by registered Democrat Gary Cohn and long time donor to the Democratic Party Steve Mnuchin) have somehow managed to sneak into the bill a surcharge that would actually raise the rate on some high income earners to 46%. That’s certainly not what the GOP has been advertising in its campaign rhetoric.

Danny Vinik writes:

House Republicans claim the tax plan they introduced Thursday keeps the top individual rate unchanged at 39.6 percent—the level at which it’s been capped for much of the past quarter-century. But a little-noticed provision effectively creates a new band in which income is taxed at over 45 percent.

Thanks to a quirky proposed surcharge, Americans who earn more than $1 million in taxable income would trigger an extra 6 percent tax on the next $200,000 they earn—a complicated change that effectively creates a new, unannounced tax bracket of 45.6 percent.

It hasn’t been advertised by Republicans, who have described their plan as maintaining the current top tax rate of 39.6 percent. And it goes against decades of GOP orthodoxy that raising taxes on the rich discourages work and reduces economic growth. Reached by phone, Steve Moore, a tax expert at The Heritage Foundation, said the surcharge was news to him. “I was just in a briefing with the White House on this,” he said. “They didn’t mention that. It seems kind of bizarre to me.”

The new rate stems from a provision in the bill intended to help the government recover, from the very wealthy, some of the benefits that lower-income taxpayers enjoy. Under the House GOP plan, all individuals—no matter whether they earn $35,000, $150,000 or $10 million—would pay the lowest rate, 12 percent, on their first $45,000 in taxable income. That’s a normal feature of current American tax law. But in the new plan, House Republicans want to claw back some of that benefit for individuals who earn more than $1 million, or couples earning more than $1.2 million.

Here’s how it would work: After the first $1 million in taxable income, the government would impose a 6 percent surcharge on every dollar earned, until it made up for the tax benefits that the rich receive from the low tax rate on that first $45,000. That surcharge remains until the government has clawed back the full $12,420, which would occur at about $1.2 million in taxable income. At that point, the surcharge disappears and the top tax rate drops back to 39.6 percent. This type of tax is sometimes called a “bubble tax,” because the marginal tax rate effectively bubbles up for a brief period before falling back to a lower level.

Read more here.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Can GOP Succeed on Tax Cuts?
  • Why Bill Gates Wants to Raise Your Taxes
  • Does the Trump Administration Really Want to Raise Taxes on the Wealthy?
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. CNBC has ranked Richard C. Young & Co., Ltd. as one of the Top 100 Financial Advisors in the nation (2019-2022) Disclosure. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • The Cloud Slowdown Is Hurting Amazon the Most - February 8, 2023
  • Real Estate “Power Buyers” Suffering Glut of Inventory - February 7, 2023
  • AI SEARCH WAR BEGINS: Google and Microsoft Join AI Battle - February 6, 2023

Search Young Research

Most Popular

  • You Aren't Getting These Yields from Your Bank Account
  • Tom Brady Retires, Again. Should You?
  • What Your Survival Guy Invested in Today
  • Suddenly, Holding Cash Looks Good Again to Many
  • Do You Trust This Rally?
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • The Power of a Compound Interest Table
  • What Happens if the "Fed Put" Is Over for Good?
  • Warren Miller: If You Don’t Do It This Year, You’ll Be…
  • Early Advice from Her Dad on Tipping at Charlie Trotter’s

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • Big Hearted, Idealistic, Daring…
  • Yes, Your Children Are Listening to You
  • BEN CARSON: How Is Biden’s Speech Creating Unity?
  • Biden’s State of the Union Address Receives Rough Reception
  • Can a Capital Injection Save Bed Bath & Beyond?
  • You Aren’t Getting These Yields from Your Bank Account
  • Democrats’ Widening Schism
  • Jimmy Buffett Playing Key West
  • Whatever You Knew, Dave Hammer Knew More
  • Dragon Tours Open for Business

RSS The Latest at Yoursurvivalguy.com

  • Yes, Your Children Are Listening to You
  • You Aren’t Getting These Yields from Your Bank Account
  • Bidenflation Has Eaten Up Americans’ Pandemic Savings
  • Dragon Tours Open for Business
  • What Your Survival Guy Invested in Today
  • You Invest, They Win: FTX Edition
  • Your Retirement Life: Adventure Awaits
  • Zumwalt-Class Guided Missile Destroyers to Get Hypersonic Weapons
  • Early Advice from Her Dad on Tipping at Charlie Trotter’s
  • Treasury Bonds Ready to Rock and Roll

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2023 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.