New Yorkers could be hit hard by Biden's tax innovations
'09.11.2020'
Vita Popova
During Joe Biden's rule, the combined tax burden for New Yorkers could rise significantly. It will be felt most by the wealthy residents of the state, least of all by those who earn up to 400 thousand dollars a year. The details are shared by the publication CNBC.
Under President-elect Joe Biden's tax plan, wealthy Americans will face higher tax rates. This will be especially felt by residents of states with high local taxes - California, New Jersey and New York. In these states, the combined tax burden (state and federal taxes) of taxpayers earning more than $ 400 a year can exceed 60%.
In California, according to Jared Walczak of the Tax Foundation, Biden's plan could see the highest paid workers face a combined tax burden rise of 62,6%. In New Jersey, combined rates could be just over 60%, while in New York State they could be as high as 58,2%. In New York City, home to most of the state's highly paid professionals, combined city, state, and federal income tax rates could be just over 62%.
Of course, only a few, if any, taxpayers pay the full statutory rates without using deductions, loans, etc. Although the maximum U.S. tax rate is currently 37%, the effective rate (what taxpayers actually pay through their accountants) for high-income individuals is 26,8%, according to the Tax Foundation. In his campaign, Biden argued that efficient rates are important to taxpayers and the economy, not statutory rates.
According to Biden's plan, the effective tax rate for the richest 1% of Americans will increase from 26,8% to 39,8%. This means that the best workers in California and New York will pay an effective state and federal tax rate of about 53% - compared to about 40% they pay at effective rates today.
The Democrats also promised, if they win in the Senate, pass a law that lifts the $ 10 cap on tax deductions for regional and local taxes, so that the combined effective state and local tax rates for the highest paid individuals can be even lower.
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However, the combined tax burden of more than 60% for high-income earners will be the largest in more than 30 years and will far exceed the rates set during the Barack Obama administration.
Biden's plan calls for an increase in the maximum federal income tax rate from 37% to 39,6% for those with taxable income in excess of $ 400. In addition, according to his plan, the payroll tax will be 12,4% for those who earn more than $ 400 thousand a year (this tax is divided between the employee and the employer). Taking into account other provisions of his plan, the maximum federal tax rate will be 49,338%.
When added to California's top rate of 13,3%, the cumulative top income tax rate for the wealthiest Californians is 62,64%. In New Jersey, where the maximum rate is 10,75%, the combined maximum rate is 60,1%. In New York State the combined rate will be 58,2%, and in New York City it will be 62%.
Waltzak said that when the tax increases for corporations and employers, which partly fall on the shoulders of workers, the combined rates will rise even more - to more than 65% in California, 62,9% in New Jersey and 64,7% in New York.
They could also jump if California and New York raise taxes for high-income people, which has been proposed by some lawmakers to cut multibillion-dollar budget deficits.
