Friday, July 17, 2009

What's the difference between a surtax and another tax bracket?

No, it's not a riddle, it's a serious question. Why is the partial financing of health care reform being pitched in the form of a surtax on the high incomes instead of the simpler, easier to calculate approach of just adding new tax brackets at the high end? Is there some political advantage to calling it a surtax?

The only thing that occurs to me is that tax brackets are indexed for inflation, and perhaps this new surtax will not be so indexed. The other possibility is that a new tax bracket likely would not apply to capital gains, while a surtax might.

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