October 28, 2021

Proposed Tax Changes Focus on the Wealthy

“All of this legislation is focused on the individual and upping the ante for the wealthy,” said Michael Kosnitzky, a partner at the law firm Pillsbury Winthrop Shaw Pittman. “Increasing the corporate tax rate does not get at the wealthy because corporate taxes are paid by the shareholders, who get less dividends, the employees who get less salary, and the consumer, who pays more for goods and services. These proposals get at personal income tax.”

The proposed top income tax rate of 39.6 percent looks like the old top rate of 39.6 percent from 2017. It kicks in at $400,000 of income for an individual and $450,000 for a couple, which is slightly lower than the income level in 2017. Currently, the highest income tax bracket, at 37 percent, starts at $523,600 for an individual and $628,300 for a couple.

But those affected by the new rate would also pay more because there are fewer deductions than there were in the tax code before the 2017 changes.

“You have to look at the effective rate,” said Pam Lucina, chief fiduciary officer and head of trust and advisory services at the financial services firm Northern Trust. “We have far fewer deductions, so that 39.6 percent rate is a much higher rate.”

The one that affected many people was the loss of the full deduction for state and local taxes, or SALT. In the 2017 changes, the deduction was limited to $10,000 and primarily affected people who lived in Democratic-controlled states in the Northeast and on the West Coast, where state income and property taxes are high.

Article source: https://www.nytimes.com/2021/09/17/your-money/tax-changes-wealthy.html

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