Republican tax bill creates new bracket for the wealthy

House Republicans included a new tax rate for wealthy Americans in legislation they released this week.

The legislation leaves the top individual rate at 39.6 percent. But after $1 million of income for individuals and $1.2 million for married couples, a tax rate of 45.6 percent would kick in.

The so-called bubble rate would go away once the taxpayer has given back the benefits received under the 12 percent tax rate that applies to the first $45,000 of income for individuals and $90,000 for married couples.

House Ways and Means Committee Chairman Kevin Brady (R-Texas) said the bubble rate was created “to try to drive more middle-class tax relief earlier in those rates where we really do well.”

Brady said that a household making $1 million would still see tax relief, citing the income levels for the brackets and the lower rate for income from pass-though businesses.

“At the end of the day, there’s tax relief at every income level, from the bottom to the top, including at the million dollar household as well,” he said Friday at an event hosted by Politico.

The bubble rate also generates revenue to help Republicans pay for the tax cuts in the legislation. 

The current tax code includes a provision that limits itemized deductions for high earners. This provision is repealed in the bill.