Three-Tiered Surtax Targets Couples Earning More Than $350,000, Singles Over $280,000
Washington, DC- An updated Tax Foundation analysis shows that 24 states would see top tax rates exceed 50% under a health care funding plan introduced over the weekend by House Ways & Means Committee Chairman Charles Rangel (D-NY).
The latest proposal being debated on Capitol Hill would impose a surtax of 1 percent on married couples with adjusted gross incomes (AGI) between $350,000 and $500,000 (individuals with incomes between $280,000 and $400,000); 1.5 percent on couples with incomes between $500,000 and $1 million (singles earning between $400,000 and $800,000); and 3 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.
"Nearly half of all states will face top tax rates over 50%," 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 45% - and that's in the nine states that don't tax wages."
Tax Foundation Fiscal Fact No. 176, "If Health Surtax Is 3 Percent, Taxpayers in 24 States Would Pay a Top Tax Rate Over 50%," may be found online at http://www.taxfoundation.org/publications/show/24848.html.
The hardest-hit states would be Oregon (55.2%), Hawaii (54.9%), New Jersey (54.7%), New York (54.6%), California (54.4%), Rhode Island (53.9%), Vermont (53.4%), Maryland (53.3%), Minnesota (52.0%), and Idaho (52.0%). Washington, DC, and New York City both would see their top effective marginal rates rise to 52.6%. 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 other 26 states range from 44.9% to 50%.
Tying federal health care expansion to unstable sources of funding such as these so-called 'millionaires' taxes' is a recipe for revenue disaster," Hodge said. "As we have seen time and again, boom-time revenue explosions inevitably give way to budget-shortfall busts."
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. 176 can be found
at http://www.taxfoundation.org/publications/show/24848.html.
To schedule an interview, please contact Tax Foundation Manager of Media Relations Natasha Altamirano at (202) 464-5102 or naltamirano@taxfoundation.org.
