The US has recently passed a new taxation act. Here are the highlights and review of the same.
The last month of the first quarter of 2021 has witnessed the introduction of a new tax scheme in the USA. Named "Ultra-Millionaire Tax Act", it certifies itself by levying massive taxes on mega-millionaires of the country.
Following are the slabs fixed for the new tax act:
For households of net worth above $50 million but below $1 billion - 2% annually
For households of net worth above $1 billion - 3% annually for the amount exceeding $1 billion.
Let us move on to analyze as to why this new tax has been introduced in the USA, and what will be the long term consequence of levying such a significant tax on the millionaires. So it is very well known fact that United States of America was the country most affected by the Coronavirus. Certainly the virus rose from China, but USA has bore the most dangerous effect of this dangerous virus. Since March 2020, USA has been constantly under this curse and more than a million people have lost their lives alone in the USA. This prolonged pandemic period has given rise to the level of poverty in the country. The poorer section of the society was not able to cope up with the extreme pandemic pressure and the gap between the poor and rich section of the society widened. Millionaires continued to make money even at this hard time, leading to even more widened gaps.
This became a matter of concern for the US government, and they surely needed to come up with a solution so as to narrow this gap. Also it is a well known fact that Progressive Taxation is one of the most important fiscal policy which can assist in reduction of income gaps. The same was applied by the US government in order to collect huge taxes from those who are very rich, and then allocate the money to the poorer sections in form of subsidies and grants (Redistribution function of the government). Intentionally, this tax is levied only on the mega-millionaires, so as to not affect the lives of common people.
Coming to the effects of this act, it will surely add up to the funds available to the government for expenditure. Moreover, the PDI (Personal Disposable Income) of the millionaires on whom the tax is imposed, will stand reduced. Also, it is to be noted that this tax is leviable on the net worth of the individual, and not on the income. It is a matter of thought whether the government of USA removes this tax after some years or not, because the main motive behind this tax is to fill the losses of the government that was incurred in the pandemic period. Also, if this tax remains active forever, this would be beneficial for the country, because of increased government revenue and reduced income gap.
If we go on to review what will be the effect of this tax on American millionaires, the analysis is as under:
Jeff Bezos = Extra $5.87 billion tax per annum
Elon Musk = Extra $4.697 billion tax per annum
Bill Gates = Extra $3.95 billion tax per annum
Mark Zuckerburg = Extra $2.69 billion tax per annum
(as of March 2021)
The Ultra-Millionaire Tax Act will surely help the country of USA to cope up with the pandemic losses and even boost the government revenue in form of tax collection. In this way, the government has found a way to get even more contribution of the ultra-rich section of the country, in the overall growth and development of the country.