Health Care and Taxes: 10 Worst States for the Rich
These 10 States Could See the Highest Combined Tax Rates If the Health Surtax Becomes Law
July 20, 2009
The health care surtax touted by some members of Congress would bring a heftier tax bill to the richest Americans, but depending on where they live, some will take bigger hits than others.
Take for instance, Eugenia, a California housewife whose husband works in finance. The Bay Area woman, who asked that her last name not be used, said her husband's income usually tops $1 million per year.
California taxes its top income earners more than 10 percent, meaning that between state taxes, federal taxes, Medicare taxes and the proposed health care surtax, the couple would face a total tax rate of more than 56 percent on part of their income.
"It's very sad, because my husband works almost 12 hours per day and can take only two weeks of vacation, and then he's getting less than half of what he's working for," Eugenia said. "On top of everything, we're going to pay for everybody else's health insurance."
The proposed health care surtax now making its way through Congress is a three-tiered plan requiring a 5.4 percent surtax for couples with an adjusted gross income of more than $1 million and individuals with an AGI of $800,000. Households with an AGI between $350,000 and $500,000 would face a 1 percent surtax and those with an AGI between $500,000 and $1 million would face a 1.5 percent surtax.
According to a report this month by the Tax Foundation, a tax research group based in Washington, D.C., wealthy taxpayers in 39 states could pay a top tax rate higher than 50 percent by 2011. The report combined states' average local tax rates, top state and federal rates with the 2.9 percent Medicare tax and the proposed 5.4 percent health surtax.