4 States Where Income Tax Rates Could Soon Top 57%

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Rich man in a panic over lost money
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As Democrats in Congress try to find ways to pay for $3.5 trillion in proposed new spending, they are looking to the richest Americans to help foot the bill.

Democrats in the House of Representatives plan to impose a surtax of 3 percentage points on individual income above $5 million, The Wall Street Journal reported this weekend. In addition, they plan to raise the top federal personal income tax rate to 39.6% from the current 37%, as President Joe Biden proposed when running for office.

The plans also maintain the 3.8% net investment income tax that has been in place since 2013.

On Monday, the House Ways and Means Committee released a summary of these planned new tax hikes. Add them all up, and it would equate to a new top marginal federal income tax rate of 46.4% if the plans became law as-is.

Once you combine that rate with state income tax rates, folks in four states could see their overall personal income tax burden surge to nearly 60% — and even beyond, CNBC reports.

So, beware if you are rich and live in any of the following places.

New York

Statue of Liberty
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The new tax plans take the biggest bite out of the Big Apple.

Currently, New York’s state personal income tax rates range from 4% to 8.82%, meaning the wealthiest would pay a combined state and federal income tax rate of 55.22%.

But in New York City itself, the highest combined city and state tax rate is 14.8%. That means taxpayers in the city who earn more than $5 million a year would need to dig deep to pay a combined city, state and federal rate of 61.2%.


Hollywood sign
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On the other side of the country, rich taxpayers in California might also lose more of their income to the tax ax.

Tax rates in the Golden State range from 1% to 12.3%, with residents with taxable income of more than $1 million paying an additional 1% tax. In other words, California’s wealthiest residents currently pay a state income tax rate of 13.3%.

Under the new House plan, California residents earning more than $5 million would pay a combined state and federal rate of 59.7%.


Honolulu, Hawaii
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Living in paradise isn’t cheap. And for Hawaii’s richest residents, it may soon become even more costly.

State tax rates currently range from 1.4% to 11%. That means Hawaii residents making more than $5 million soon could pay a top combined state and federal rate of 57.4%.

New Jersey

Steel Pier in Atlantic City, New Jersey
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Money doesn’t grow on trees, even in the Garden State. But wealthy residents of New Jersey soon may wish it did.

State rates in New Jersey range from 1.4% to 10.75%. That means the richest citizens would pay a top combined state and federal tax rate of about 57.2%.

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