Update: Top Surtax Rate of 3 Percent Agreed upon by House Democrats

July 12, 2009

On Friday, before reports were released of a House plan that would push for a 3 percent surtax on very high-income tax returns, along with a 1 percent and 1.5 percent surtax at other high-income levels, the Tax Foundation released a study showing what the effective marginal tax rates would be in each state under a 4 percent surtax, which was the number that had been floated.

On Monday, the Tax Foundation will release an updated version of the top effective marginal tax rates by state under a 3 percent surtax as opposed to a 4 percent surtax.

According to Lori Montgomery’s article in Saturday’s Washington Post (posted Friday evening), the surtax would begin in 2011 and be imposed on AGI for married returns as follows:

1 percent surtax on AGI between $350,000 and $500,000

1.5 percent surtax on AGI between $500,000 and $1,000,000

3 percent surtax on AGI beyond $1,000,000

For single returns, the 1 percent surtax would begin at an AGI level of $280,000. Assuming the same 28/35 ratio (80%) on the top two surtax rates, a single would be hit with the 1.5 percent surtax at an AGI level of $400,000 and the 3 percent surtax at $800,000 in AGI.

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