§2.Modification of income tax rates
This section replaces the individual income tax rate tables in IRC Section 1(a)–(e) with new progressive schedules adding a top marginal rate of 39.6% (from 37%) applicable to taxable income over $2,000,000 for married individuals filing joint returns and surviving spouses, over $1,000,000 for heads of households, over $1,000,000 for unmarried individuals (other than surviving spouses), over $1,000,000 for married individuals filing separate returns, and retains a top rate of 37% over $12,500 for estates and trusts—effective for taxable years beginning after December 31, 2025, without transitional rules under IRC Section 15.
The new tables establish the following initial brackets (subject to inflation adjustment):
- Married filing jointly/surviving spouses: 10% ($0–$19,050), 12% (to $77,400), 22% (to $165,000), 24% (to $315,000), 32% (to $400,000), 35% (to $600,000), 37% (to $2,000,000), 39.6% (over $2,000,000).
- Heads of households: 10% ($0–$13,600), 12% (to $51,800), 22% (to $82,500), 24% (to $157,500), 32% (to $200,000), 35% (to $500,000), 37% (to $1,000,000), 39.6% (over $1,000,000).
- Unmarried individuals/married filing separately: similar structure scaled to half of joint brackets through 24% rate, then 32% (to $200,000), 35% (to $500,000/$300,000), 37% (to $1,000,000), 39.6% (over $1,000,000).
- Estates and trusts: 10% ($0–$2,550), 24% (to $9,150), 35% (to $12,500), 37% (over $12,500).
This section further (1) revises the inflation adjustment mechanism in Section 1(f) to base the cost-of-living adjustment on calendar year 2017 (from 2016), round increases to the next lowest multiple of $25 ($50 for joint returns), strike paragraph (8), and update the subsection heading; (2) repeals Sections 1(i) and 1(j); and (3) amends Section 3402(q)(1) to base supplemental wage withholding on the fourth lowest rate (from third lowest).