Monday Map: Top Effective Marginal Tax Rates Under House Health Care Plan

On November 7, 2009, the House of Representatives passed a health care reform bill that includes a 5.4% surtaxA surtax is an additional tax levied on top of an already existing business or individual tax and can have a flat or progressive rate structure. Surtaxes are typically enacted to fund a specific program or initiative, whereas revenue from broader-based taxes, like the individual income tax, typically cover a multitude of programs and services. aimed at high-income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. returns. Those who would be hit by the surtax pay 36% of all federal taxes.

This map, using data from our report “If Health Surtax Is 5.4 Percent, Taxpayers in 39 States Would Pay a Top Tax Rate Over 50%,” shows the top effective marginal tax rateThe marginal tax rate is the amount of additional tax paid for every additional dollar earned as income. The average tax rate is the total tax paid divided by total income earned. A 10 percent marginal tax rate means that 10 cents of every next dollar earned would be taken as tax. if the surtax is enacted. This is the tax imposed on each additional dollar of income after the top tax rate has kicked in. (More on average vs. marginal tax rates here.)

In 39 states, the combined top tax rate would be over 50% (shown in yellow and blue). In 8 states, the combined top tax rate would be over 55% (shown in blue)

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