A “tax-the-rich” provision in the House-passed reconciliation bill would reduce the value of itemized deductions for 37 percent taxpayers. The provision would replace current law’s Pease limitation on the value of itemized deductions.

Generally, the provision would require taxpayers in the 37 percent tax bracket to reduce the amount of their itemized deductions by 2/37 of the lesser of the amount of itemized deductions, or so much of the taxpayer’s taxable income as exceeds the dollar amount at which the 37 percent bracket begins. This limitation applies after the application of any other limitation on the allowance of itemized deduction (e.g., the charitable contribution deduction).

Prospects: This provision is driven by the need for offsetting revenue. However, its complexity and the general GOP opposition to “tax-the-rich” proposals raises the possibility that the Senate will either drop or modify it. It is too soon to tell. NAIFA will watch this closely and keep you informed.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org