Illinois representative Jan Schakowsky has introduced a new taxation bill that would create tax brackets for millionaires and billionaires in the US.

In a statement, Rep Schakowsky said the new scheme is meant to address issues of income inequality in the country, which is "at its worst since 1928". The current top tax bracket starts at $373,000 and fails to distinguish between the well-off and billionaires, the statement said.

Under the new Fairness in Taxation Act, brackets are introduced for those with incomes from $1 million to $1 billion. Those with $1 million to $10 million in income will be subject to a 45 per cent tax; income of $10-$20 million will be taxed at 46 per cent; $20-$100 million at 47 per cent; $100 million to $1 billion at 48 per cent, and $1 billion and above at 49 per cent.

The bill will also tax capital gains and dividend income as ordinary income for those who earn at least $1 million.

According to the statement, if enacted in 2011, the new bill would generate over $78 billion for the US government.

"In the US today, the richest 1 per cent own 34 per cent of our nation's wealth - that's more than the entire bottom 90 per cent who own just 29 per cent of the country's wealth. It's time for millionaires to billionaires to pay their fair share," Rep Schakowsky said.

"This isn't about punishment or revenge. It's about fairness," he added.

Schakowsky is a member of the 18-strong Fiscal Commission. Original co-sponsors of the bill include co-chairs of the Congressional Progressive Caucus, Rep Paul Grijalva of Arizona, Rep Keith Ellison of Minnessota, Rep Jesse Jackson of Illinois, Rep Donna Edwards of Maryland, Rep Bob Filner of California, Rep Jerry Nadler of New York, Rep Steve Cohen of Tennessee, Rep John Yarmuth of Kentucky, and Rep Peter DeFazio of Oregon. Groups that have declared support for the bill include United for a Fair Economy, Citizens for Tax Justice, Citizen Action Illinois, US Action, Campaign for America's Future, Wealth for the Common Good, and The Agenda Project.