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Congresswoman proposes new tax bracket for millionaires

WASHINGTON — While Congress is debating federal budget cuts as a way to help solve the nation’s deficit crisis, an Illinois representative emerged Wednesday with a different solution.

Rep. Jan Schakowsky, an Evanston Democrat, has introduced the Fairness in Taxation Act, which would create new, higher tax brackets for Americans making more than $1 million and $1 billion a year.

“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,” Schakowsky said. “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.”

The proposal, however, was quickly criticized as a distraction by Republicans, who said cuts have to be made in order to create an environment where jobs can be created.

“The American people know our challenges today are driven by past irresponsible spending choices in Washington, and they’re not looking for tax increases. They’re looking for Washington to control its spending,” said Rep. Peter Roskam, a Wheaton Republican and chief deputy whip in the GOP-controlled House.

In pushing her plan, Schakowsky pointed to a March 2 NBC/Wall Street Journal poll suggesting the most popular way to reduce the deficit is to increase taxes on those who make more than $1 million a year.

The current top tax bracket is 35 percent for those making more than $373,000 a year. Schakowsky is suggesting creating new tax brackets, beginning at 45 percent for those making more than $1 million and increasing in steps to 49 percent for those making over $1 billion.

“Historically, these rates are relatively modest,” Schakowsky said. “During most of the Reagan administration, the top tax rate was 50 percent. And over the prior four decades, the top rate was as high as 94 percent.”

Estimates by the Citizens for Tax Justice say the Fairness in Taxation Act would raise more than $78.9 billion if enacted in 2011.

The bill also would tax capital gains and dividends as ordinary income in those brackets. This would prevent those who make large sums of money through, for example, hedge funds from being in lower tax brackets. Last year, the average income of the top 20 hedge fund managers was over $1 billion, Schakowsky said.

She said she hopes the introduction of this legislation will broaden the discussion on deficit reduction, which has been primarily focused on cuts to nondefense, discretionary funding.

Republicans, however, think that’s where the discussion should remain.

“This proposal is a distraction from Congress’s true task — cut spending to remove barriers to job creation,” Roskam said.

The bill does have some support from those who could potentially pay this increased tax. Fifteen millionaires endorsed a letter in support of the proposed law, saying it is an important step toward strengthening the economy.

  Rep. Jan Schakowsky on Wednesday proposed new tax brackets for people who make more than $1 million and more than $1 billion a year. She is joined by Katharine Myers, left, a millionaire from Pennsylvania, and Rep. Raul Grijalva, a Democrat from Arizona. Nicole Thompson/nthompson@dailyherald.com
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