Over the weekend, we got our first look at the actual legislative language for the surtax on millionaires that Senate Democrats have added to the Obama Jobs bill - and the fine print has some interesting items in it.
The Congressional Budget Office reported late Friday that the revised plan with the 5.6% surtax on millionaires would raise $453 billion over ten years, bringing in $6 billion more than the $447 billion cost of the President's plan.
The surtax would be applied to those who make more than $1 million in income in a year - $500,000 "in the case of a married individual filing a separate return."
In other words, you aren't going to get around the tax by splitting your income between the husband and wife.
One other interesting item is that the millionaire's surtax is actually indexed for inflation, so that after 2013, the $1 million surtax could actually become the $1.03 or $1.035 million surtax, etc., depending on what happens with inflation.
And if you're wondering how that number is established - the old process of rounding is your answer.
"If any amount as adjusted under paragraph (1) is not a multiple of $10,000, such amount shall be rounded to the next highest multiple of $10,000," states the bill.
As with any piece of tax legislation, there are some "Special Rules" that govern the fine print as well:
"`(1) NONRESIDENT ALIEN- In the case of a nonresident alien individual, only amounts taken into account in connection with the tax imposed under section 871(b) shall be taken into account under this section.
`(2) CITIZENS AND RESIDENTS LIVING ABROAD- The dollar amount in effect under subsection (a) shall be decreased by the excess of--
`(A) the amounts excluded from the taxpayer's gross income under section 911, over
`(B) the amounts of any deductions or exclusions disallowed under section 911(d)(6) with respect to the amounts described in subparagraph (A).
`(3) CHARITABLE TRUSTS- Subsection (a) shall not apply to a trust all the unexpired interests in which are devoted to one or more of the purposes described in section 170(c)(2)(B).
`(4) 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 or for purposes of section 55.'.
I will let you go through that language to see if there's anything that should raise a Congressional eyebrow or not.
The surtax goes in place of all of the tax provisions in the original Obama jobs bill, like limits on deductions for those making over $200,000/year for an individual or $250,000 for a family.
The change has not won over all Senate Democrats, which could make for some tricky times on the Senate floor this week for Senate Majority Leader Harry Reid.
Senators will take a test vote Tuesday on whether to shut off debate on a motion to start debate on the bill.
