Estimate the impact of the cost-of-living exemption and millionaire surtax
The Working Americans' Tax Cut Act, introduced by Senator Chris Van Hollen, has two main provisions:
A new exemption from taxable income that phases out between the exemption amount and 175% of the exemption amount, varying by filing status.
A marginal surtax on AGI above $1M (single) or $1.5M (joint), with rates of 5%, 10%, and 12% at higher thresholds.
| Filing status | Exemption | Phase-out ends | Standard deduction | Zero-tax threshold |
|---|---|---|---|---|
| Single | $46,000 | $80,500 | $16,100 | $52,900 |
| Head of household | $64,400 | $112,700 | $24,150 | $74,750 |
| Married filing jointly | $92,000 | $161,000 | $32,200 | $105,800 |
The zero-tax threshold is the AGI below which taxable income is zero under WATCA. The phase-out reduces the exemption by $1.33 per additional dollar of AGI, but each dollar of AGI also directly increases taxable income, so the combined effective rate is $2.33 per dollar.
| AGI threshold | Marginal rate |
|---|---|
| $0 – $1,000,000 | 0% |
| $1,000,000 – $2,000,000 | 5% |
| $2,000,000 – $5,000,000 | 10% |
| $5,000,000+ | 12% |
| AGI threshold | Marginal rate |
|---|---|
| $0 – $1,500,000 | 0% |
| $1,500,000 – $3,000,000 | 5% |
| $3,000,000 – $7,500,000 | 10% |
| $7,500,000+ | 12% |