High-income residents of New York City and Hawaii would have the highest marginal tax rates in the U.S. if Congress adopts the president's proposal to increase taxes for top earners, according to a study by the Tax Foundation.
State, local and federal levies would result in a top 50.8 percent rate on high-income New York City residents, the study says. Wealthy Hawaiians would pay 49.7 percent. And residents of California, Vermont, Maryland and New York would face top federal- state rates of 49.4 percent, 48.8 percent, 48.6 percent and 48.4 percent, respectively.
Lower tax rates on income and investments enacted in 2001 and 2003 expire Dec. 31. President Barak 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 percent and 39.6 percent next year. Phase-outs for deductions and exemptions would also 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.
The marginal tax rate rankings of states would be little changed if all tax cuts are extended, the study found. In that case, the top marginal rate in New York City would be 45.3 percent; Hawaii, 44.3 percent; California, 44.1 percent; Vermont, 43.3 percent; Maryland, 43.1 percent; New Jersey and New York, 43 percent.
Click here to calculate your predicted 2011 tax rate.
Introduction to Value Investing
Are you the next Warren Buffett?View Course »