Congressman Chris Van Hollen, D-Md., is introducing legislation to provide a “Paycheck Bonus Tax Credit” of $1,000 for every worker, which would be paid for with taxes on financial trading.
The Democratic proposal, which Van Hollen outlined Monday, aims to reduce the pay disparities between the average worker and wealthy investors.
“The tax code is now skewed in favor of people who make money off of money and against those who make money off of work,” Van Hollen said in a description of his action plan Monday. “It also provides tax breaks for things like corporate jets and racehorses. Surely we can change the tax code to incentivize corporations to give employees bigger paychecks and reward people who earn money through hard work. This is a plan to grow the paychecks of all, not just the wealth of a few. This proposal attacks the chronic problem of stagnant middle-class incomes from both directions—it promotes bigger paychecks and lets workers keep more of what they earn. Today, I am proposing policies that will raise wages, increase personal savings, and grow the economy.”
Under Van Hollen’s proposal, the new Paycheck Bonus Tax Credit would provide $1,000 per worker per year, or $2,000 for a two-earner couple. The Paycheck Bonus Tax Credit would phase out for incomes of $100,000 per individual (or $200,000 per working couple), indexed for inflation.
Van Hollen’s office estimates that over a worker’s 40-year career, the Paycheck Bonus Tax Credit would raise a typical worker’s income by $40,000. If consistently saved and invested, that amount could grow to between $110,000 and $150,000 per person, or up to $300,000 per couple.
In addition, he proposed a “Saver’s Bonus” of $250 for each person who applies at least $500 of his or her $1,000 Paycheck Bonus Tax Credit (or Earned Income Tax Credit) toward a tax-preferred savings plan.
To encourage corporations to pay their employees more wages, Van Hollen has also introduced the CEO-Employee Paycheck Fairness Act, which would prevent big corporations from claiming tax deductions for the CEO and other corporate compensation over $1 million unless workers are receiving paycheck increases that reflect increases in worker productivity and the cost of living.
Under Van Hollen’s bill, corporations also could not claim those deductions if they are laying off employees. He pointed out that corporations can currently claim tax deductions for CEO salaries up to a limit of $1 million but can deduct an unlimited amount for bonuses and “performance pay.”
“I do not think taxpayers should subsidize CEO bonuses if the CEOs are cutting the real wages of their employees or laying off workers,” he said.
The CEO-Employee Paycheck Fairness Act could be revised to allow corporations to deduct CEO and executive compensation in excess of $1 million if the corporations provide their employees with ownership and profit-sharing plans meeting certain standards, he added.
Van Hollen also proposed to provide tax credits to those businesses that establish apprenticeships or other job-training partnerships.
He also proposed a “Second Earner Tax Deduction” for couples that would provide a 20 percent tax deduction for second earners with dependents on up to $60,000 of their income. According to Van Hollen, this tax deduction would reward work and make the tax code fairer for second earners and their families, boosting the take-home incomes of more than 7 million households. A two-earner family, with one spouse earning $60,000 and the other earning $30,000, would thereby be able to save $900 in taxes from the Second-Earner Tax Deduction.
Van Hollen has also proposed to modernize the Child and Dependent Care Tax Credit, which has remained capped since 2003 at $3,000 for one child and $6,000 for two or more children. His plan proposes to raise the amount of eligible expenses to $8,000 for one child ($16,000 for two or more) and provide a 20 to 25 percent flat credit that would phase out for households above $200,000. The credit would also be made refundable to enable the families who struggle the most to pay for child care to be able to benefit from this credit.
Van Hollen proposed to pay for the tax credits and expanded tax breaks by imposing a “high roller” fee on financial transactions to curb speculation. He noted that the European Union is moving toward a 0.1 percent trading fee that would raise an estimated $44 billion per year, and the United Kingdom already applies a fee of 0.5 percent on stock trades.
The proposals are not likely to be approved in the Republican-dominated Congress but may end up as part of the Democratic platform in the 2016 elections.
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