BLOOMBERGS TAX PLAN EXPLAINED
February 23, 2020 - Douglas Myser
Bloombergs tax plan explained. As part of President Trump's signature legislation--the Tax Cuts and Jobs Act--the top rate on ordinary income--things like wages, business income, and interest income, was reduced from a high of 39.^% to 37%. Of course, the U.S. tax system is a progressive system, meaning we pay higher taxes as our income increases. under the current structure, those rates begin at 10% and then climb to 37% via the following steps, 12%, 22%, 24%, and 35%. It's also important to note that there is an additional 3.8% surcharge that applies to the "net investment income" of certain high income individuals--things like interest income or income from a business in which you don't actively participate--meaning the top rate on these forms of income can reach a high of 40.8%. Bloombergs tax plan explained. Bloombergs proposal, has promise to increase the top IRS tax bracket back to 39.6%, presumably without changing the income level at which the rate applies. Thus, under his plan the top rate would kick in at approximately $510,000 of income for a single taxpayer and $612,000 for those married filing jointly. Then to extract additional revenue from the nation's richest --the common denominator among all Democratic tax plans released to date--Bloomberg would assess a surtax of 5% on IRS income above $5 million. That would increase the top rate on ordinary income to 44.6% before accounting for the 3.8% net investment income tax. Thus, the top rate on interest income for passive business income would reach a high of 48.4% Bloombergs tax plan explained.
Long term capital gains and qualified dividends are currently taxed at a high of 20%, though most Americans pay 15%, with those in the 10% and 12% brackets paying 0%. Of course, you have to tack on net investment income tax of 3.8% so the rate reaches a high of 23.8%. Bloombergs plan, like all his Democratic counterparts, would increase the top rate to a top rate of 43.4%, 39.6% and 3.8% in total.
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