July 14, 2009
Media Advisory: Who Would Pay New Health Care Surtax?
Tax Foundation Takes Closer Look at "Millionaires" Targeted by Surtax
Washington, DC, July 14, 2009 - The latest plan to fund an expansion in government health care targets married couples earning more than $350,000, a group dominated by owners of small and medium-sized businesses.
"Sometimes, it's easy to raise taxes on an anonymous group - a faceless income bracket - but let's look at the facts and understand how these people, their businesses and employees will be affected by new taxes," said Tax Foundation President Scott Hodge.
- Q: How high will the total federal-state-local tax rate be on these high-income people?
A: The House of Representatives has agreed to 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 between $400,000 and $800,000); and 3 percent on couples earning more than $1 million (singles over $800,000). If those rates are in law by 2011, the top tax rate in 24 states would exceed 50%, according to a Tax Foundation analysis released yesterday (http://www.taxfoundation.org/publications/show/24848.html).
- Q: How much will businesses be affected?
A: Roughly 30 percent of all business taxes are paid through the individual income tax (through S-Corporations, LLCs, partnerships, and sole-proprietorships), according to the Treasury Department, which also estimates that non-corporate businesses account for one-third of salaries and wages.
- Q: Is there a difference in the economic damage caused by various taxes?
A: According to the Organization for Economic Cooperation and Development (OECD) in Paris, corporate income taxes are the most harmful for economic growth, followed by high marginal personal income taxes, consumption taxes and property taxes.
- Q: Is the U.S. tax code less "progressive" than the codes in other nations, and will these new taxes equalize that?
A: A separate OECD study released late last year found that the United States already has the most progressive personal income tax system among the 30 OECD nations and that it "collects the largest share of taxes from the richest 10% of the population."
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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For more information, please visit www.taxfoundation.org. To schedule an interview, please contact Tax Foundation Manager of Media Relations Natasha Altamirano at (202) 464-5102 or naltamirano@taxfoundation.org.