If the tax cuts passed during President George W. Bush’s term expire as scheduled on Dec. 31 and return to previous levels, taxpayers in three States will see their marginal tax rates exceed 50 percent, according to a study by two Lynchburg College economists.
Gerald T. Prante and Austin John recently compared State-by-State estimates of the top marginal effective tax rates (METRs) on wages, interest, dividends, capital gains and business income for the 2012 tax year and rates scheduled for 2013 under current law. They found that the highest earners in California, Hawaii and New York will pay more than half their income to government.
Californians would get a double whammy. The first blow came from Proposition 30, which passed last month and increased sales and income taxes retroactively to the beginning of the year. The second will come if Congress and President Barack Obama fail to negotiate a deal to continue the lower tax rates in the so-called fiscal cliff negotiations. Obama seeks to raise taxes on those earning more than $200,000.
According to the study, the top marginal rate for Californians will climb to 51.9 percent. Hawaiians will see their rate increase to 50.5 percent. New Yorkers will have a rate of 50.3 percent.