Tax Plans May Give Your Co-Worker a Better Deal Than You

So a decorator, an artist or a plumber would have a higher tax rate than an owner of a decorating business, an art shop or a plumbing supply store. A corporate accountant could have a higher rate than a partner in an accounting firm. And under the House bill, which differentiates between active and passive investors, the head of a family business who works 60-hour weeks would have a higher rate than her brother, who doesn’t work there and can spend his days sleeping on the couch.

The proposals’ impact rises steeply as paychecks grow. High-income earners — roughly the upper 10 percent — who can take advantage of the new distinctions would be rewarded with substantial gains compared with those who can’t.

Supporters argue that the revised tax regime is an attempt to update the code to reflect changes in the economy. Rather than depend primarily on individual rate cuts to further power the economy, the Republican plans focus on cutting taxes on certain types of business income. The idea is that these businesses will reinvest those higher returns and…

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