Tax horror: These states will have the highest tax burdens under Obama's new plan

Tax horror: These states will have the highest tax burdens under Obama's new plan
Wednesday, September 22, 2010

From Bloomberg:

High-income residents of New York City and President Barack Obama's home state of Hawaii would have the highest marginal tax rates in the U.S. if Congress adopts his proposal to increase taxes for top earners, a study found.

The Tax Foundation, a Washington research group that advocates for lower taxes, said state, local and federal taxes would impose a top 50.8 percent rate on high-income New York City residents. Affluent Hawaiians would pay 49.7 percent. Residents of California, Vermont, Maryland and New York round out the five states with the heaviest burdens, with top federal-state rates of 49.4 percent, 48.8 percent, 48.6 percent and 48.4 percent, respectively.

"High-income taxpayers, along with second earners, tend to be the most sensitive to higher marginal taxes," said Gerald Prante, the Tax Foundation economist who prepared the report. "And as they keep getting higher and higher, the marginal cost grows even faster."

Lower tax rates on income and investments enacted in 2001 and 2003 expire Dec. 31. Obama and most Democrats want to retain those that target individuals earning less than $200,000 and married couples earning under $250,000 and allow policies that benefited those with higher incomes to expire. Republicans generally back extending all of the tax cuts.

Obama's proposal would allow the top marginal tax rates of 33 percent and 35 percent to revert to 36 and 39.6 percent next year. Phase-outs for deductions and exemptions also would be reinstated, pushing the rate higher. Tax rates on dividends and capital gains would increase to 20 percent from 15 percent.

Under current law, the top federal tax rate applies only to taxable income that exceeds about $375,000; amounts below that are taxed at lower rates. Taxable income is equal to gross income minus deductions, so most taxpayers wouldn't begin paying at top rates until they gross more than about $400,000.

To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.


Source;

http://bit.ly/tax_man


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