Republican members of the Senate Finance Committee have confirmed discussions over increasing the tax rate on income above $1 million to 39.6% — the highest income tax bracket before passage of the 2017 tax reform package.

According to some members, the rationale behind increasing the rate from 37% to 39.6% is to provide funding to support increasing the child tax credit. If the 2017 tax reforms are not extended beyond the end of 2025, the top income tax rate would revert to the 39.6% rate for the highest income levels.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about Republican committee members’ proposals to raise the income tax rate on earnings over $1 million.

Below is a summary of the debate that ensued between the two professors.

Their Votes:

Bloink

Byrnes

Their Reasons:

Bloink: While I agree that tax rates on the wealthiest Americans should go up, this proposal really is only the tip of the iceberg. Yes, we have to find a way to pay for any extension of the 2017 tax reforms and the wealthiest should pay their own way.

Still, we know that the wealthiest Americans can manipulate their income so that really very little of the money they take home counts as "income" for ordinary income tax purposes.

Byrnes: This tax hike proposal will absolutely never become part of the final package of tax reforms that we see this year. Republican values firmly dictate against raising taxes on any American, including those who have succeeded and have among the highest earning levels.

All sorts of ideas are being discussed, but an outright tax rate increase seems incredibly unlikely to succeed when the support of all Republicans is essentially required to pass the legislation via the reconciliation process.

Bloink: This tax, accompanied by an increase in the capital gains tax for the wealthiest and closing of tax loopholes, would be a more efficient combination when it comes to ensuring the wealthiest pay their fair share.

Focusing on finding ways to force the super wealthy to pay their fair share will be beneficial to everyone — including those wealthy Americans who want to see the 2017 tax cuts extended beyond 2025 in a fiscally responsible way.

Byrnes: This proposal does not go so far as reverting to the pre-2018 39.6% tax rate (because the rate would apply to earnings only in excess of $1 million, currently, the highest tax rate only kicks in for earnings above roughly 609,000 for 2025).

Still, the problem remains that while some GOP members on the finance committee have proposed this so-called “solution,” conservative Republicans simply would not support a tax bill that raises income tax rates for any group of Americans.

Bloink: I do think the idea of applying a 39.6% rate to income over $1 million will gain traction. Cutting Medicaid to pay for tax cuts is a solidly bad idea, and I think finding ways to pay for an enhanced child tax credit has fairly widespread bipartisan support.

Republicans on the finance committee have suggested that the revenue from this tax could be used to support the child tax credit for hardworking Americans — an idea that will garner support from Democrats and moderate-leaning Republicans alike.

Byrnes: The optics alone behind this proposal are such that it’s never going to become the rule of law under a Republican-led government. Yes, Congress is discussing a range of ideas to ensure that we extend the 2017 tax cuts. Tax increases, however, are a fundamentally doomed plan.

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