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.
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%.
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%.
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%.
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%.
For more tax stories, check out: