Senate-Passed Deal Means Higher Taxes on 77% of Households

Tuesday, 01 Jan 2013 02:10 PM

 

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The budget deal passed by the U.S. Senate today would raise taxes on 77.1 percent of U.S. households, mostly because of the expiration of a payroll tax cut, according to preliminary estimates from the nonpartisan Tax Policy Center in Washington.

More than 80 percent of households with incomes between $50,000 and $200,000 would pay higher taxes. Among the households facing higher taxes, the average increase would be $1,635, the policy center said. A 2 percent payroll tax cut, enacted during the economic slowdown, is being allowed to expire as of yesterday.

The heaviest new burdens in 2013, compared with 2012, would fall on top earners, who would face higher rates on income, capital gains, dividends and estates. The top 1 percent of taxpayers, or those with incomes over $506,210, would pay an average of $73,633 more in taxes.

Much of that burden is concentrated at the very top of the income scale.

The top 0.1 percent of taxpayers, those with incomes over about $2.7 million, would pay an average of $443,910 more, reducing their after-tax incomes by 8.4 percent. They would pay 26 percent of the additional taxes imposed by the legislation.

Among households with incomes between $500,000 and $1 million, taxes would go up by an average of $14,812.
Top Tax Rate

The bill, being discussed by House members today, would raise the top tax rate to 39.6 percent from 35 percent last year, starting with income over $400,000 for individuals and $450,000 for married couples.

The top tax rates on capital gains and dividends would go up to 23.8 percent, from 15 percent last year. The new rate includes a 3.8 percent tax from the 2010 health-care law that took effect today.

The Tax Policy Center’s definition of income is a gross measure that includes items such as the employer’s share of payroll taxes, making it larger for many households than the adjusted gross income shown on tax returns.

© Copyright 2014 Bloomberg News. All rights reserved.

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