Bill Summary
The "Paying a Fair Share Act of 2025" is proposed legislation aimed at ensuring high-income earners contribute a fairer share of federal taxes. The bill introduces a new tax, termed the "Fair Share Tax," specifically targeting individuals with an adjusted gross income exceeding $1 million (or $500,000 for married individuals filing separately).
Key provisions of the legislation include:
1. **Fair Share Tax**: This tax is calculated based on the excess of a taxpayer's income over the established threshold, applying a rate of 30% on the income exceeding that limit, adjusted for a modified charitable contribution deduction.
2. **Inflation Adjustment**: The $1 million threshold will be adjusted for inflation in subsequent years to ensure it remains relevant.
3. **Exclusions and Adjustments**: The tax is designed to work alongside existing tax liabilities, ensuring that the total tax burden reflects both regular tax and payroll tax obligations, while allowing for certain deductions.
4. **Effective Date**: The provisions of this act would apply to taxable years beginning after December 31, 2024.
5. **Sense of the Senate**: The bill expresses a desire for broader tax reform that eliminates loopholes, simplifies the tax code, and guarantees that wealthier taxpayers pay a fair share, positioning this act as a preliminary measure toward more extensive reform.
Overall, this legislation seeks to address wealth inequality by increasing the tax responsibilities of the highest earners, potentially reducing the federal deficit and paving the way for future tax reforms.
Possible Impacts
The "Paying a Fair Share Act of 2025" could have several effects on people, particularly those who fall into the high-income category, as well as on public services and the economy as a whole. Here are three examples:
1. **Increased Tax Burden on High-Income Earners**:
- Individuals with an adjusted gross income exceeding $1,000,000 will face a new tax obligation, which could significantly increase their overall tax burden. This may impact their disposable income, leading to changes in spending behavior, investment decisions, and savings patterns. High-income earners may choose to alter their financial strategies to mitigate the impact of the new tax, which could result in reduced expenditures in luxury markets or investments that rely on high-income discretionary spending.
2. **Potential Impact on Charitable Contributions**:
- The act modifies the charitable contribution deduction, which could lead to a decrease in the amount that high-income earners are willing to donate to charities. Since the tentative fair share tax calculation considers the modified charitable deduction, individuals may opt to reduce their charitable giving if they feel that the tax implications diminish the benefits of their contributions. This could affect the funding of non-profit organizations and community services that rely heavily on donations from wealthy individuals.
3. **Increased Government Revenue and Public Services**:
- The implementation of this tax is expected to generate additional revenue for the federal government, which could be used to fund public services and programs. This might lead to improvements in education, healthcare, infrastructure, or social programs that benefit a broader segment of the population, including middle- and lower-income individuals. As a result, communities could see enhanced public services, which may improve overall quality of life and support economic growth in these areas.
Overall, the "Paying a Fair Share Act of 2025" aims to address income inequality and ensure that wealthier individuals contribute a fairer share of taxes, which can have ripple effects throughout the economy and society.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1243 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 1243
To ensure high-income earners pay a fair share of Federal taxes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 1 (legislative day, March 31), 2025
Mr. Whitehouse (for himself, Mr. Merkley, Mr. Blumenthal, Mr. Van
Hollen, Mr. Durbin, Ms. Klobuchar, Mr. Reed, Ms. Hirono, Mr. Sanders,
Ms. Baldwin, Ms. Warren, Mr. Booker, Mr. Welch, Ms. Smith, and Mr.
Markey) introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To ensure high-income earners pay a fair share of Federal taxes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Paying a Fair Share Act of 2025''.
SEC. 2. FAIR SHARE TAX ON HIGH-INCOME TAXPAYERS.
(a) In General.--Subchapter A of chapter 1 of the Internal Revenue
Code of 1986 is amended by adding at the end the following new part:
``PART VIII--FAIR SHARE TAX ON HIGH-INCOME TAXPAYERS
``Sec. 59B. Fair share tax.
``SEC. 59B. FAIR SHARE TAX.
``(a) General Rule.--
``(1) Phase-in of tax.--In the case of any high-income
taxpayer, there is hereby imposed for a taxable year (in
addition to any other tax imposed by this subtitle) a tax equal
to the product of--
``(A) the amount determined under paragraph (2),
and
``(B) a fraction (not to exceed 1)--
``(i) the numerator of which is the excess
of--
``(I) the taxpayer's adjusted gross
income, over
``(II) the dollar amount in effect
under subsection (c)(1), and
``(ii) the denominator of which is the
dollar amount in effect under subsection
(c)(1).
``(2) Amount of tax.--The amount of tax determined under
this paragraph is an amount equal to the excess (if any) of--
``(A) the tentative fair share tax for the taxable
year, over
``(B) the excess of--
``(i) the sum of--
``(I) the regular tax liability (as
defined in section 26(b)) for the
taxable year, determined without regard
to any tax liability determined under
this section,
``(II) the tax imposed by section
55 for the taxable year, plus
``(III) the payroll tax for the
taxable year, over
``(ii) the credits allowable under part IV
of subchapter A (other than sections 27(a), 31,
and 34).
``(b) Tentative Fair Share Tax.--For purposes of this section--
``(1) In general.--The tentative fair share tax for the
taxable year is 30 percent of the excess of--
``(A) the adjusted gross income of the taxpayer,
over
``(B) the modified charitable contribution
deduction for the taxable year.
``(2) Modified charitable contribution deduction.--For
purposes of paragraph (1)--
``(A) In general.--The modified charitable
contribution deduction for any taxable year is an
amount equal to the amount which bears the same ratio
to the deduction allowable under section 170 (section
642(c) in the case of a trust or estate) for such
taxable year as--
``(i) the amount of itemized deductions
allowable under the regular tax (as defined in
section 55) for such taxable year, determined
after the application of section 68, bears to
``(ii) such amount, determined before the
application of section 68.
``(B) Taxpayer must itemize.--In the case of any
individual who does not elect to itemize deductions for
the taxable year, the modified charitable contribution
deduction shall be zero.
``(c) High-Income Taxpayer.--For purposes of this section--
``(1) In general.--The term `high-income taxpayer' means,
with respect to any taxable year, any taxpayer (other than a
corporation) with an adjusted gross income for such taxable
year in excess of $1,000,000 (50 percent of such amount in the
case of a married individual who files a separate return).
``(2) Inflation adjustment.--
``(A) In general.--In the case of a taxable year
beginning after 2025, the $1,000,000 amount under
paragraph (1) shall be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
determined by substituting `calendar year 2024'
for `calendar year 2016' in subparagraph
(A)(ii) thereof.
``(B) Rounding.--If any amount as adjusted under
subparagraph (A) is not a multiple of $10,000, such
amount shall be rounded to the next lowest multiple of
$10,000.
``(d) Payroll Tax.--For purposes of this section, the payroll tax
for any taxable year is an amount equal to the excess of--
``(1) the taxes imposed on the taxpayer under sections
1401, 1411, 3101, 3201, and 3211(a) (to the extent such tax is
attributable to the rate of tax in effect under section 3101)
with respect to such taxable year or wages or compensation
received during such taxable year, over
``(2) the deduction allowable under section 164(f) for such
taxable year.
``(e) Special Rule for Estates and Trusts.--For purposes of this
section, in the case of an estate or trust, adjusted gross income shall
be computed in the manner described in section 67(e).
``(f) Not Treated as Tax Imposed by This Chapter for Certain
Purposes.--The tax imposed under this section shall not be treated as
tax imposed by this chapter for purposes of determining the amount of
any credit under this chapter (other than the credit allowed under
section 27(a)) or for purposes of section 55.''.
(b) Clerical Amendment.--The table of parts for subchapter A of
chapter 1 of the Internal Revenue Code of 1986 is amended by adding at
the end the following new item:
``Part VIII--Fair Share Tax on High-Income Taxpayers''.
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2024.
SEC. 3. SENSE OF THE SENATE REGARDING TAX REFORM.
It is the sense of the Senate that--
(1) Congress should enact tax reform that repeals unfair
and unnecessary tax loopholes and expenditures, simplifies the
system for millions of taxpayers and businesses, and makes sure
that the wealthiest taxpayers pay a fair share; and
(2) this Act is an interim step that can be done quickly
and serve as a floor on taxes for the highest-income taxpayers,
cut the deficit by billions of dollars a year, and help
encourage more fundamental reform of the tax system.
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