Wealthy New York-area households that benefited from a decade-long break on federal individual income taxes stand to lose the most if the Bush-era tax cuts are repealed next year.
Among U.S. households making more than $200,000, filers in Fairfield County, Conn. paid the top effective individual income tax rate in the nation at 25.6%, according to Internal Revenue Service data compiled by Bloomberg. The wealthy in Manhattan paid 24.9%. Those in Essex County, N.J., handed over 24.3% of their income to the government. The average U.S. household that made more than $200,000 paid an effective rate of 22.6% in 2008, the latest year for which data are available.
Among that group of higher-income households, New Yorkers had the highest average adjusted gross income in the nation, $1.01 million. Their average capital gains, $200,376, trailed only Palm Beach County, Fla.’s $207,838 average.
The figures highlight how wealthy taxpayers benefit from breaks set to expire next year by paying a far lower rate on income from investments and dividends than the 35% rate assessed on all taxable income over $388,350.
The wealthiest taxpayers “pay a lower rate, because so much is capital gains,” said Michael Graetz, a Columbia University tax professor and former Treasury Department counsel. “But a lot of people earning more than $200,000 are going to be paying full freight on income from salaries.”
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