Hillary Clinton proposes tax ‘surcharge’ on Americans who earn over $5m

The Democratic presidential candidate’s plan, which would increase tax rate to 4% for only 0.02% of Americans, was criticized by Sanders’s campaign

Hillary Clinton would add a 4% tax “surcharge” on Americans who earn more than $5m a year and close “egregious” tax loopholes if she became president, expanding on her campaign promise to ensure that the super-rich pay a rate higher than middle-class families.

“My plan is kind of simple: we go after the wealthy to pay for what the middle class, working class and poor people need,” the Democratic frontrunner said at a campaign event in Ames, Iowa, on Tuesday.

Her surcharge proposal, unveiled on Monday, would take the top tax rate to its highest since 1986, though it will only apply to 0.02% of Americans.

“Right now we’re behind and we need to get the wealthy and the corporations to pay for their fair share, so I can keep my promise, which is I will not raise taxes on the middle class,” Clinton told hundreds of voters at a campaign stop in Waterloo, Iowa, on Monday.

On Tuesday, Clinton’s campaign released details of two additional ways the Democrat would ensure that the “wealthy pay their fair share”. Clinton would close what it is calling the “Bermuda reinsurance loophole”, a scheme in which high-income money managers have set up insurance companies in low-tax countries to avoid paying higher taxes in the US.

She also proposed closing the so-called “Romney loophole”, a reference to the 2012 presidential candidate’s disclosure during the election cycle that he had accumulated as much as $102m in his retirement account. According to her campaign, the measure would limit the ability of the wealthiest Americans to shield their large large incomes in tax-preferred accounts.

Taken together, her campaign estimates that her series of tax proposals will raise between “$400 and $500bn in revenue over 10 years”, which would be used to pay for her robust domestic policy agenda.

Clinton’s tax plan comes as she faces increased pressure from her populist challenger, Vermont senator Bernie Sanders, whose campaign is based around a crusade against Wall Street and the super-rich. Asked during the last Democratic debate if Wall Street would like President Sanders, he said: “The CEOs of large multinationals may like Hillary, but they ain’t gonna like me and Wall Street is going to like me even less.”

Recent polls have shown Clinton and Sanders locked into close races in New Hampshire and in Iowa, where she had maintained a commanding lead until recently.

Responding to Clinton’s tax plan, a Sanders campaign spokesman on Monday called it “too little too late”.

“We need real tax reform which demands that Wall Street, corporate America and the top 2% start paying their fair share,” Michael Briggs said in a statement.

Sanders’s campaign has said he will roll out his tax policy agenda before the 1 February caucus.

On Tuesday, Clinton quipped that she was “eager” to see the plan, saying she always shared how she would pay for her proposals.

In an interview with CNN, Vice-President Joe Biden, who almost ran against Clinton and Sanders, described Sanders as more authentic on economic inequality than Clinton, and he defended his record on gun control, another key faultline.

Biden, who decided not to run months after his son’s death, said Sanders spoke to “a yearning that is deep and real” on issues of wealth disparity and people left out of the economy. He said Sanders had credibility on the issue, but that for Clinton, the issue was relatively new.

“Hillary’s focus has been other things up to now, and that’s been Bernie’s. No one questions Bernie’s authenticity on those issues,” Biden said. He went on to say people questioned anybody who had not been talking about the issue that long.

Last month, billionaire investor Warren Buffett endorsed Clinton while calling for higher taxes on America’s highest wage earners, and, earlier this month, Clinton vowed to go beyond the “Buffett rule”, which calls on top earners to pay more in taxes.

Clinton has said her campaign is dedicated to raising the incomes of middle-class Americans. To achieve this, Clinton has proposed an economic policy agenda and a series of domestic policies that includes a tax credit for families taking care of sick or elderly relatives, a $350bn plan to make college debt-free for students and a proposal to expand access to pre-kindergarten. She has also pledged not to raise taxes on middle-income Americans.

“We need to get the wealthy and the corporations to pay more of their fair share so I can keep my promise, which is I will not raise taxes on the middle class,” Clinton said in Waterloo. “That is absolutely my pledge to you.”