July 14, 2009
Couples Earning More than $1 Million Hit with 5.4% Surtax
Washington, DC, July 14, 2009 - A third updated Tax Foundation report shows that 39 states would see top tax rates exceed 50% under a health care funding plan announced today by House Democrats.
The latest proposal—one of several floated on Capitol Hill in the past few days and the third analyzed by the Tax Foundation since Friday—would impose a surtax of 1 percent on married couples with adjusted gross incomes (AGI) between $350,000 and $500,000 (singles between $280,000 and $400,000); 1.5 percent on couples with incomes between $500,000 and $1 million (singles earning between $400,000and $800,000); and 5.4 percent on couples earning more than $1 million (singles beyond $800,000).
The Tax Foundation released an initial report Friday based on another plan that had been floated that included a 4 percent surtax, as well as an updated report yesterday based on a three-tiered structured with a maximum rate of 3% for couples earning more than $1 million.
"More than three-quarters of the states would face combined top income tax rates exceeding 50% under this latest health care funding proposal," Tax Foundation President Scott Hodge said. "That means government would be taking more than half of every additional dollar from high-income taxpayers. The lowest top tax rate would be about 47%—and that's in the nine states that don't tax wages."
Tax Foundation Fiscal Fact No. 178, "If Health Surtax Is 5.4 Percent, Taxpayers in 39 States Would Pay a Top Tax Rate Over 50%," may be found online at http://www.taxfoundation.org/publications/show/24863.html.
The hardest-hit states would be Oregon (57.5%), Hawaii (57.2%), New Jersey (57.1%), New York (56.9%), California (56.8%), Rhode Island (56.2%), Vermont (55.8%), Maryland (55.6%), Minnesota (54.4%) and Idaho (54.3%). Washington, DC, and New York City would see their top effective marginal rates rise to 55.0% and 58.7%, respectively. The effective marginal tax rate takes into consideration deductions and adjustments in order to present a truer measure of an individual's rate.
Top tax rates in the remaining 11 states range from 47.3% to 50%.
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
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Fiscal Fact No. 178 can be found at http://www.taxfoundation.org/publications/show/24863.html. To schedule an interview, please contact Tax Foundation Manager of Media Relations Natasha Altamirano at (202) 464-5102 or naltamirano@taxfoundation.org.