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Pascrell, Capuano Propose Adding New Tax Brackets

With the Bush tax cuts expiring, there have been several proposals out there suggesting what we do. We’ve looked at the three major solutions to the expiring Bush tax cuts [3] as well as one less well known alternative [4], but there’s a new one on the table that seems to make a lot of common sense [5] (just not political sense).

Representative Bill Pascrell (D-NJ) and Representative Michael Capuano (D-MA) suggest the introduction of a new tax bracket [6] starting at $500,000, an idea (known as the Pascrell Compromise) they floated before the mid-term elections. It also includes a five year extension on current middle class tax rates (individuals < $200,000 and families < $250,000) and long term capital gains and qualified dividends. It also includes a one year extension on tax rates for filers making under $500,000 annually (effectively creating a $500,000 tax bracket). This effective "decouples" the tax brackets at the $500,000 income level and political experts are claiming that this will not get Republican support. Once you decouple the higher tax brackets, it'd be political suicide to vote against continuing the middle class (income under $200,000 and $250,000) tax cuts. The interesting part will be to see if all the voters to voiced their opinion about the national deficit and debt will do the same about continuing huge tax cuts for everyone, including themselves. 🙂 In case you were wondering, Bargaineering readers weighed in on the subject [7] just recently.