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The 'revenge tax' is dead before it even started | CNN Business

The article from CNN, published on June 27, 2025, titled "Revenge Tax: The New Section 899 and Its Implications," delves into the recently introduced Section 899 of the Internal Revenue Code, which has been dubbed the "Revenge Tax." This new tax provision has sparked significant debate and concern among taxpayers, financial experts, and policymakers. The article provides a comprehensive overview of the tax, its origins, its potential impacts, and the ongoing discussions surrounding it.

Origins and Purpose of Section 899

Section 899 was introduced as part of a broader tax reform package aimed at addressing income inequality and increasing federal revenue. The provision was proposed by a coalition of lawmakers who argued that the current tax system disproportionately benefits the wealthy and fails to adequately tax certain types of income. The "Revenge Tax" moniker stems from the belief that it is a retaliatory measure against high-income earners and certain industries perceived to have benefited from previous tax policies.

The primary purpose of Section 899 is to impose a new surtax on high-income individuals and certain types of income that have historically been subject to lower tax rates. The surtax is intended to generate additional revenue for the federal government, which proponents argue can be used to fund social programs, infrastructure projects, and other public initiatives.

Key Features of Section 899

The article outlines the key features of Section 899, which include:

Income Thresholds: The surtax applies to individuals with annual incomes exceeding $400,000 and married couples filing jointly with incomes over $450,000. These thresholds are adjusted annually for inflation.

Tax Rates: The surtax rate is set at 5% for incomes between the threshold and $1 million, 7% for incomes between $1 million and $5 million, and 10% for incomes above $5 million. These rates are in addition to existing federal income tax rates.

Types of Income: Section 899 targets specific types of income that have historically been taxed at lower rates, including capital gains, dividends, and certain types of business income. The surtax applies to these income streams at the same rates as ordinary income.

Deductions and Credits: The provision limits certain deductions and credits for taxpayers subject to the surtax, such as the mortgage interest deduction and the state and local tax (SALT) deduction. This is intended to prevent high-income earners from offsetting their tax liability.

Potential Impacts on Taxpayers

The article discusses the potential impacts of Section 899 on taxpayers, particularly those in the high-income brackets. For individuals and families with incomes above the specified thresholds, the surtax could significantly increase their overall tax burden. The article provides examples of how the surtax might affect different income levels, illustrating the potential increase in tax liability for a single filer earning $500,000 annually and a married couple earning $1.5 million.

Financial experts cited in the article express concern that the surtax could lead to behavioral changes among high-income earners, such as increased tax planning and potential relocation to states with more favorable tax environments. Some experts also warn that the surtax could discourage investment and entrepreneurship, as the higher tax rates on capital gains and dividends might reduce the incentive to invest in stocks and other assets.

Industry-Specific Impacts

The article also examines the potential industry-specific impacts of Section 899. Certain sectors, such as finance and technology, which often generate significant capital gains and dividend income, could be disproportionately affected by the surtax. The article quotes industry leaders who argue that the new tax could stifle innovation and growth in these sectors, potentially leading to job losses and reduced economic activity.

On the other hand, proponents of the surtax argue that it could help level the playing field by ensuring that high-income earners and certain industries pay their fair share of taxes. They contend that the additional revenue generated by the surtax could be used to fund initiatives that benefit the broader economy and society, such as education, healthcare, and infrastructure improvements.

Political and Public Reactions

The article delves into the political and public reactions to Section 899. The provision has been met with strong opposition from conservative lawmakers and business groups, who argue that it represents an unfair and punitive tax on success. They contend that the surtax could have negative economic consequences and discourage investment and job creation.

Conversely, progressive lawmakers and advocacy groups have praised Section 899 as a necessary step toward addressing income inequality and ensuring that the wealthiest individuals and corporations contribute more to the federal budget. They argue that the surtax is a fair and equitable way to raise revenue and fund essential public services.

Public opinion on the surtax appears to be divided, with some polls indicating support for the measure among lower- and middle-income earners who believe it will help reduce income inequality. However, other polls suggest that a significant portion of the public is concerned about the potential economic impacts of the surtax and its effect on investment and job growth.

Legal and Constitutional Challenges

The article also discusses the potential legal and constitutional challenges to Section 899. Some legal experts argue that the surtax could be vulnerable to challenges on the grounds that it violates the equal protection clause of the Fourteenth Amendment or the uniformity clause of the Constitution. They contend that the provision's targeted approach to certain types of income and its impact on specific industries could be seen as discriminatory.

However, other legal scholars believe that Section 899 is likely to withstand legal challenges, as the Supreme Court has historically granted Congress significant latitude in crafting tax policy. They argue that the surtax is a legitimate exercise of Congress's taxing power and that the provision's income thresholds and rates are within the bounds of constitutional authority.

Future Outlook and Potential Reforms

The article concludes by discussing the future outlook for Section 899 and potential reforms that could be considered. The provision is set to take effect in the 2026 tax year, but there is already speculation about possible modifications or repeal efforts. Some lawmakers have proposed adjustments to the income thresholds, tax rates, and types of income subject to the surtax, while others have called for a complete repeal of the provision.

The article also explores the broader implications of Section 899 for the future of tax policy in the United States. The introduction of the surtax has reignited debates about income inequality, tax fairness, and the role of the federal government in addressing these issues. It has also prompted discussions about the need for comprehensive tax reform that addresses the complexities and inequities of the current system.

In conclusion, the article provides a thorough examination of Section 899, the "Revenge Tax," and its potential impacts on taxpayers, industries, and the broader economy. It highlights the ongoing debates and discussions surrounding the provision and underscores the significance of this new tax policy in the context of broader efforts to address income inequality and reform the tax system.

Read the Full CNN Article at:
[ https://www.cnn.com/2025/06/27/investing/revenge-tax-section-899 ]