WASHINGTON (Reuters) - The latest Republican offer to resolve the U.S. “fiscal cliff” standoff keeps tax rates low for households making less than $1 million a year, but millionaires get the benefit of lower taxes too, according to a non-partisan study released on Wednesday.
The analysis by the Tax Policy Center found that Republican House Speaker John Boehner’s so-called Plan B provides an average tax cut of about $108,000 for households making more than $1 million, when compared to the rates this group would face if the country went over the cliff.
Taxpayers earning between $50,000 and $75,000 a year get an average tax cut of about $1,400, according to the analysis.
The reason is that tax rates are imposed on a marginal basis. A taxpayer making $1.1 million, for example, would only pay the higher rate on $100,000 of their income, enjoying the same break as lower earners on income below the million-dollar level.
The Republican proposal, which is set for a vote on Thursday, extends the lower tax rates on household income below $1 million.
Income above the $1 million threshold would be taxed at a 39.6 percent tax rate, up from the current top rate of 35 percent.
Boehner and President Barack Obama are locked in a standoff to avert some $600 billion in tax hikes and spending cuts looming at year’s end, known as the fiscal cliff.
Obama’s latest offer would extend the lower tax rates on household income below $400,000 a year, raising top rates to 39.6 percent on income above that level.
Reporting By Kim Dixon; Editing by Eric Beech