Top Effective Marginal Rates under a 4-Percent Health Care Surtax

By July 13, 2009Health Care, Taxation

From The Tax Foundation:

Funding for increases in the federal government’s spending on health care continues to be debated in Washington. The newest funding proposal floated by the House Ways and Means Committee is a surtax levied on married tax returns with adjusted gross incomes (AGI) over $250,000 and single returns earning above $200,000. While there is speculation as to what the actual surtax rate will be, the 4 percent figure seems to be the focal point.

A 4-percent federal surtax along with recent increases targeted at high-income taxpayers at the state level has led to concern over how high the top tax rates would be in each state, especially large states with very high top marginal tax rates like California and New York. Some researchers merely sum the rates at the federal, state and local level to give a statutory total tax rate. A more accurate method is to calculate the effective marginal tax rate. The effective marginal tax rate takes into consideration deductions and exclusions in order to present a truer measure of an individual’s rate. Technically, it is the change in tax liability for a $1 increase in income.

The entry has a full, state-by-state chart, but we’ll lead with the top five:

Top Effective Marginal Rates under a 4-Percent Health Care Surtax by State

State

Top State Rate

Top Federal Ordinary Rate

New Surtax

Medicare Tax

Top Effective Marginal Rate

HI

11.00%

39.60%

4.00%

2.90%

55.84%

OR

11.00%

39.60%

4.00%

2.90%

55.84%

NJ

10.75%

39.60%

4.00%

2.90%

55.61%

CA

10.55%

39.60%

4.00%

2.90%

55.43%

RI

9.90%

39.60%

4.00%

2.90%

54.84%

Now there’s a list of economically vital states, eh?

And news coverage…

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