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1 If Health Surtax Is 5.4 Percent, Taxpayers in 39 States Would Pay a Top Tax Rate Over 50% 1 (2009)

handle is hein.taxfoundation/ffbhixz0001 and id is 1 raw text is: July 2009 No. 178 FISCAL FACT If Health Surtax Is 5.4 Percent, Taxpayers in 39 States Would Pay a Top Tax Rate Over 50% By TF Staff Introduction 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: 1 percent surtax on AGI between $350,000 and $500,000 (singles between $280,000 and $400,000) 1.5 percent surtax on AGI between $500,000 and $1,000,000 (singles between $400,000 and $800,000) 5.4 percent surtax on AGI beyond $1,000,000 (singles beyond $800,000) 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. Some commentators 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, which takes into consideration deductions and adjustments. 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.

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