Could the Top Tax Rate Reach 60%?

The Tax Foundation totals all the various income tax increases and surcharges under consideration. It then ranks the impact on top taxpayers by state, assuming these increases become law by 2011. In 39 states, the combined tax rate could soon be well north of 50%. This assessment does not take into account Social Security taxes, so it probably understates the total tax burden by a bit.

And, if you look down the list below, you will see that the combined tax hit for high income earners could get painfully close to 60% in several states. The top state for taxes will be Oregon, with New York third on the list and California at the fourth spot. If we considered New York City in the mix, a resident of NYC would have the honor of being #1 with a top rate of almost 59%.

Fiscal Fact No. 178 (Tax Foundation, July 14, 2009, Tax Foundation Staff)

New taxes to fund the federal government’s plan for higher health insurance spending continue to be debated in Washington. According to a new Bloomberg report, the top surtax rate will be 5.4 percent in the House plan…That will be the top rate in a three-tiered surtax aimed at high-income tax returns.

…States have been raising taxes on this same group, leading to concern over how high the combined tax rates would be in each state, especially in the growing number of states with double-digit tax rates.

…In Table 1 below we present calculations of the effective marginal tax rate on top earners. We assume that the current state and local income tax rates will remain through 2011, the top federal taxable income rate will rise as scheduled to 39.6 percent, and a new House plan for 5.4 percent surtax on AGI earned at very high-income levels will become law.

Table 1
Top Effective Marginal Rates under Proposed Health Care Surtax by State
Sorted by Combined Top Tax Rate in 2011

State	Avg. Local Rate	Top State Rate (2011)	Top Federal Ordinary Rate	New Surtax	Medicare Tax	Combined Top Rate	Rank
Oregon	0.36%	11.00%	39.6%	5.4%	2.9%	57.54%	1
Hawaii	0.00%	11.00%	39.6%	5.4%	2.9%	57.22%	2
New York^	1.70%	8.97%	39.6%	5.4%	2.9%	56.92%	3
California	0.00%	10.30%	39.6%	5.4%	2.9%	56.58%	4
Rhode Island	0.00%	9.90%	39.6%	5.4%	2.9%	56.22%	5
Vermont	0.00%	9.40%	39.6%	5.4%	2.9%	55.77%	6
Maryland	2.98%	6.25%	39.6%	5.4%	2.9%	55.61%	7
New Jersey	0.09%	8.97%	39.6%	5.4%	2.9%	55.46%	8
Minnesota	0.00%	7.85%	39.6%	5.4%	2.9%	54.36%	9
Idaho	0.00%	7.80%	39.6%	5.4%	2.9%	54.32%	10
North Carolina	0.00%	7.75%	39.6%	5.4%	2.9%	54.27%	11
Wisconsin	0.00%	7.75%	39.6%	5.4%	2.9%	54.27%	11
Ohio	1.82%	5.93%	39.6%	5.4%	2.9%	54.27%	13
Delaware	0.16%	6.95%	39.6%	5.4%	2.9%	53.69%	14
Arkansas	0.06%	7.00%	39.6%	5.4%	2.9%	53.65%	15
South Carolina	0.00%	7.00%	39.6%	5.4%	2.9%	53.59%	16
Maine	0.00%	6.85%	39.6%	5.4%	2.9%	53.46%	17
Nebraska	0.00%	6.84%	39.6%	5.4%	2.9%	53.45%	18
Kentucky	0.76%	6.00%	39.6%	5.4%	2.9%	53.37%	19
West Virginia	0.00%	6.50%	39.6%	5.4%	2.9%	53.14%	20
Kansas	0.00%	6.45%	39.6%	5.4%	2.9%	53.09%	21
Missouri	0.12%	6.00%	39.6%	5.4%	2.9%	52.79%	22
Georgia	0.00%	6.00%	39.6%	5.4%	2.9%	52.69%	23
Virginia	0.00%	5.75%	39.6%	5.4%	2.9%	52.46%	24
Oklahoma	0.00%	5.50%	39.6%	5.4%	2.9%	52.23%	25
Massachusetts	0.00%	5.30%	39.6%	5.4%	2.9%	52.05%	26
Connecticut	0.00%	5.00%	39.6%	5.4%	2.9%	51.78%	27
Mississippi	0.00%	5.00%	39.6%	5.4%	2.9%	51.78%	27
Utah	0.00%	5.00%	39.6%	5.4%	2.9%	51.78%	27
New Mexico	0.00%	4.90%	39.6%	5.4%	2.9%	51.69%	30
North Dakota	0.00%	4.86%	39.6%	5.4%	2.9%	51.65%	31
Iowa	0.30%	8.98%	39.6%	5.4%	2.9%	51.61%	32
Michigan	0.44%	4.35%	39.6%	5.4%	2.9%	51.59%	33
Colorado	0.00%	4.63%	39.6%	5.4%	2.9%	51.44%	34
Indiana	1.16%	3.40%	39.6%	5.4%	2.9%	51.38%	35
Arizona	0.00%	4.54%	39.6%	5.4%	2.9%	51.36%	36
Pennsylvania	1.25%	3.07%	39.6%	5.4%	2.9%	51.16%	37
Montana	0.00%	6.90%	39.6%	5.4%	2.9%	50.48%	38
Louisiana	0.00%	6.00%	39.6%	5.4%	2.9%	50.05%	39
Illinois	0.00%	3.00%	39.6%	5.4%	2.9%	49.97%	40
Alabama	0.19%	5.00%	39.6%	5.4%	2.9%	49.67%	41
Alaska	0.00%	0.00%	39.6%	5.4%	2.9%	47.25%	42
Florida	0.00%	0.00%	39.6%	5.4%	2.9%	47.25%	42
Nevada	0.00%	0.00%	39.6%	5.4%	2.9%	47.25%	42
New Hampshire	0.00%	0.00%	39.6%	5.4%	2.9%	47.25%	42
South Dakota	0.00%	0.00%	39.6%	5.4%	2.9%	47.25%	42
Tennessee	0.00%	0.00%	39.6%	5.4%	2.9%	47.25%	42
Texas	0.00%	0.00%	39.6%	5.4%	2.9%	47.25%	42
Washington	0.00%	0.00%	39.6%	5.4%	2.9%	47.25%	42
Wyoming	0.00%	0.00%	39.6%	5.4%	2.9%	47.25%	42
District of Columbia	0.00%	8.50%	39.6%	5.4%	2.9%	54.95%
New York City^	3.65%	8.97%	39.6%	5.4%	2.9%	58.68%
Source: Tax Foundation calculations, State Individual Income Tax Rates Note: The rightmost column, Combined Top Rate, is the top effective marginal rate, taking into account deductions and adjustments, and therefore does not equal the sum of the first four rates.

Source: Tax Foundation

Via: Greg Mankiw

Comments

[oddsneds:]

Great list but NJ's new 2009 state income tax rates (in budget passed 7-1-09) not reflected - this will add 1.78% to NJ top rate, pushing NJ up from #8 to #3 on the list. A crappy distinction.

Jul 16 10:32 AM