A brief article on the Tax Policy Center website
by Howard Gleckman looks at one of the oddities of the fiscal cliff deal, the
creation of a very tiny tax bracket.
The passing
of the American Taxpayer Relief Act (ATRA) of 2012 which made permanent most of
the tax cuts from the Bush-era and avoided the national cliff dive, created a
teensy little tax bracket for single Americans who earn between $398,350 and
$400,000, a bracket that spans a massive taxable income range totalling $1650
as shown on this chart:
Single
Americans who fall in this tiny bracket will pay a marginal tax rate of 35 percent;
those making under the $398,350 income level will pay a marginal tax rate of
only 33 percent and those making over the $400,000 level will see their
marginal tax rate jump to 39.6 percent. By way of comparison, the 35
percent bracket for married couples filing jointly covers a range of incomes
from $398,350 to $450,000 and for the head of the household, the same 35 percent bracket
covers a range of incomes from $398,350 to $425,000. For singles, before
the passing of ATRA 2012, those with taxable incomes over $398,350 in 2012 had
a marginal tax rate of 35 percent that would have jumped to 39.6 percent had
the Bush-era tax cuts expired.
How many
Americans will this change affect? The Tax Policy Center estimates that
it will impact less than 500 taxpayers or less than 0.05 percent of all
American taxpayers.
If Congress
had started the 39.6 percent tax bracket for single earners at $400,000 instead
of $398,350, those 500 odd Americans affected would have seen their tax bills
jump by a whopping $75.90 or a total of less than $38,000 for all of them combined. Just think of what Washington could have done with the extra money!
As the
author points out, it was in the 1970s when tax brackets were this narrow as shown on this
screen capture:
Apparently,
the good old days are back for the 500 single Americans earning between
$398,350 and $400,000.
Actually, this narrow bracket affects far more people than the 500 or so who land with their marginal rate in it. For every taxpayer whose income is above $400,000, or, in other words, every American in the new 39.6% bracket, their tax burden is lower by that $75.90 than it would be had the bracket started at $398,350 rather than $400,000.
ReplyDeleteIf this roughly equates to the "top 1%," that would be what, at least 2 million people?