The Independent View: Republicans Forget to Explain 45.6% Tax Rate That Low Income Taxpayers Will Love

House Republicans claim the Tax Plan they introduced Thursday keeps the Top Individual Rate Unchanged at 39.6%, the Level at which it’s been Capped for much of the past Quarter-Century. But a little-noticed Provision effectively creates a New Rate which Income is Taxed at over 45.6%.

Thanks to a quirky proposed Surcharge, Americans who earn more than $1 million in Taxable Income would trigger an extra 6% Tax on the next $200,000 they Earn, a complicated Change that effectively creates a New, Unannounced Tax Bracket of 45.6%.

It hasn’t been Advertised by Republicans, who have described their Plan as Maintaining the Current Top Tax Rate of 39.6%. And it goes against Decades of GOP orthodoxy that Raising Taxes on the Rich discourages Work and Reduces Economic Growth. Steve Moore, a Tax Expert at The Heritage Foundation, said the Surcharge was news to him. “I was just in a briefing with the White House on this,” he said. “They didn’t mention that. It seems kind of bizarre to me.”

The New Rate stems from a Provision in the Bill intended to help the Government Recover, from the very Wealthy, some of the Benefits that Lower-Income Taxpayers enjoy. In the New Plan, House Republicans want to Claw Back some of that Benefit for Individuals who earn more than $1 million, or Couples earning more than $1.2 million.

Here’s how it would work: After the first $1 million in Taxable Income, the Government would impose a 6% Surcharge on every Dollar Earned, until it made up for the Tax Benefits that the Rich receive from the Low Tax Rate, 12%, on that first $45,000. That Surcharge remains until the Government has Clawed Back the full $12,420, which would occur at about $1.2 Million in Taxable Income. At that point, the Surcharge disappears and the Top Tax Rate Drops back to 39.6%. This type of Tax is sometimes called a “Bubble Tax,” because the Marginal Tax Rate effectively bubbles up for a brief period before falling back to a lower level.

The Surcharge could raise more than $50 Billion over a Decade, Money that will help the GOP meet the $1.5 Trillion in Deficit Reduction and required to Balance out Tax Cuts elsewhere. Balancing out those Costs means that the Bill can Pass through Budget Reconciliation, and Senate Democrats can’t Filibuster the Bill.

According to the Internal Revenue Service, 438,000 Tax Filers had more than $1 Million in Taxable Income in 2015, most of whom also make more than $1.2 Million, meaning they’d Pay the full additional $12,420 in Bubble Tax. Altogether, that Surcharge could have raised roughly $5 Billion in 2015, the latest year in which numbers are available, meaning it could potentially bring in around $50 Billion over the next Decade. That’s not huge Money in a Plan that Cuts Taxes $1.5 Trillion, but Every Bit Counts.