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…for the first time since the United States adopted an income tax, a higher rate would be applied to employee wages and salaries than to income earned by proprietors, partnerships and closely held corporations.

The House and Senate bills vary in detail, but both end up linking tax rates to a whole new set of characteristics like ownership, day-to-day level of involvement, organizational structure or even occupation. These rules, mostly untethered from income level, could raise or lower tax bills by hundreds or thousands of dollars for ordinary taxpayers and millions of dollars for the largest eligible businesses.

“We’ve never had a tax system where wage earners were substantially penalized” relative to other types of income earners, said Adam Looney, a senior fellow at the Brookings Institution and a former Treasury Department official.

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

The G.O.P. bills impose different rates on the same income based on things like organizational structure or occupation. At the losing end? Employees with paychecks.


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