How Much the Rich Would Actually Pay If They Had Higher Tax Rates

No one wants to pay more in taxes, but many Americans are calling for higher taxes on the rich. In fact, some Congressional members are proposing a “tax the rich” strategy that would impose a 70 percent tax rate on earnings beyond $10 million.

Whether or not tax rates actually rise, here’s the bottom line: For most of contemporary American history, the idea of higher taxes for the rich has been a reality, with historic tax rates reaching well above 37 percent for the country’s highest earners. In the boom years of 1951-64, for example, the top marginal rate was an astounding 91 percent. During the 16-year stretch from 1970-86, the top marginal rate was 50 percent.

But to find out how higher tax rates could impact the rich today, GOBankingRates examined the effects of higher marginal tax rates on the top 1 percent’s income in every state. So instead of paying taxes on a 37 percent rate — the highest tax rate in the U.S. — we looked at how much the top 1 percent would pay if the rates were raised to 40 percent, 50 percent, 60 percent and 70 percent after taking the standard deduction. For the purposes of this state-by-state study, it’s important to understand that this research is not incorporating Alexandra Ocasio-Cortez’s 70 percent marginal tax proposal because the top 1 percent’s income does not exceed $10 million in every state.

The difference in some states is quite noticeable, with high earners in Connecticut, for example, paying significantly more in a theoretical 70 percent bracket than those in lower-income states like West Virginia. If these hypothetical tax rates were to become real, certain states will become better or worse for the rich.

Alabama

• Average income of top 1%: $743,644
• Amount paid on a 50% tax rate: $266,510
• Amount paid on a 70% tax rate: $312,838

Alabama’s top 1 percent rank fairly low on the income scale, compared to other states; however, their tax bite isn’t nearly as bad either. Even a 60 percent marginal rate would translate to about a 39 percent effective tax rate, taking $289,674 in income.

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Alaska

• Average income of top 1%: $910,059
• Amount paid on a 50% tax rate: $349,717
• Amount paid on a 70% tax rate: $429,329

For a high-income, high-expense state, the top 1 percent in Alaska earn a relatively “low” $910,059 on average. Higher taxes for the wealthy would cause significant damage to take-home pay for the richest 1 percent; a jump from the current top marginal rate to a rate of 60 percent would result in nearly an additional $100,000 in taxes.

Arizona

• Average income of top 1%: $882,657
• Amount paid on a 50% tax rate: $336,016
• Amount paid on a 70% tax rate: $410,147

Every 10 percent increase in marginal tax rates would increase tax payments for the top 1 percent by about $37,000 each, which isn’t as bad as the effect in some other states.

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Arkansas

• Average income of top 1%: $864,772
• Amount paid on a 50% tax rate: $327,074
• Amount paid on a 70% tax rate: $397,628

In Arkansas, an income of $864,772 is enough to put taxpayers in the top 1 percent. Taxes aren’t too horrendous for these top earners, as even a 70 percent marginal rate takes away less than half of the top earners’ income.

California

• Average income of top 1%: $1,693,094
• Amount paid on a 50% tax rate: $741,235
• Amount paid on a 70% tax rate: $977,453

California’s top earners pull down a lot of money, but taxes can be devastating in the higher brackets. Even a 60 percent marginal rate will result in the highest earners losing more than half of their income to taxes, at $859,344.

Colorado

• Average income of top 1%: $1,261,053
• Amount paid on a 50% tax rate: $525,214
• Amount paid on a 70% tax rate: $675,025

Home of the Mile High City, Colorado also boasts a mile-high average income for its richest 1 percent. Taxes can take a huge bite out of this income though, with even a 40 percent marginal rate resulting in $450,309 in taxes on average.

Connecticut

• Average income of top 1%: $2,522,806
• Amount paid on a 50% tax rate: $1,156,091
• Amount paid on a 70% tax rate: $1,558,252

The top 1 percent in Connecticut earn nearly four times the amount that they earn in Mississippi, the lowest-earning state on the list. The state also boasts one of the wealthiest school districts in the country. In this high-income state, a 70 percent tax rate would be devastating, resulting in a tax of $1,558,252 on an income of $2,522,806.

Delaware

• Average income of top 1%: $869,461
• Amount paid on a 50% tax rate: $329,418
• Amount paid on a 70% tax rate: $400,910

Delaware’s top earners have a middle-of-the-road average income and a similar average tax burden. Even a theoretical 70 percent marginal tax rate would result in a tax bill less than half of a top earner’s average salary.

Florida

• Average income of top 1%: $1,543,124
• Amount paid on a 50% tax rate: $666,250
• Amount paid on a 70% tax rate: $872,474

Florida’s top earners pull down nearly 40 times the average income of the bottom 99 percent. However, higher tax rates would decimate those earnings, with even a 60 percent marginal rate confiscating more than half of the income of the top 1 percent.

Georgia

• Average income of top 1%: $995,576
• Amount paid on a 50% tax rate: $392,476
• Amount paid on a 70% tax rate: $489,191

Georgia’s top 1 percent earn nearly $1 million on average. A 50 percent marginal rate would still result in take-home pay of over $603,000 on average, meaning the tax bite in Georgia isn’t quite as bad as in some other states.

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Hawaii

• Average income of top 1%: $797,001
• Amount paid on a 50% tax rate: $293,188
• Amount paid on a 70% tax rate: $350,188

The gap between the average worker’s salary in Hawaii and that earned by the state’s top 1 percent is relatively small. In states like Connecticut, top earners pull down about 37 times the average salary, but the multiplier is closer to 14 in Hawaii.

Idaho

• Average income of top 1%: $829,268
• Amount paid on a 50% tax rate: $309,322
• Amount paid on a 70% tax rate: $372,775

Idaho’s biggest earners face one of the smallest tax bills among the 50 states. A 60 percent marginal rate on the average top 1 percent earnings of $829,268 results in a tax bill of $341,048. A 70 percent rate would take less than half of a top earner’s salary.

Illinois

• Average income of top 1%: $1,412,024
• Amount paid on a 50% tax rate: $600,700
• Amount paid on a 70% tax rate: $780,704

Illinois has one of the highest average incomes in the nation for the top 1 percent of earners, but it comes with a big tax bill. A 50 percent marginal rate triggers taxes of over $600,000, and that figure jumps by another 30 percent if rates rise to 70 percent.

Indiana

• Average income of top 1%: $804,275
• Amount paid on a 50% tax rate: $296,825
• Amount paid on a 70% tax rate: $355,280

Top incomes in Indiana are barely over $800,000, less than one-third of those in high-income states like Connecticut. The tradeoff is that taxes in Indiana aren’t as much of a burden, with a take-home pay of $536,677 in the 40 percent marginal bracket.

Iowa

• Average income of top 1%: $788,419
• Amount paid on a 50% tax rate: $288,897
• Amount paid on a 70% tax rate: $344,181

Iowa’s richest 1 percent are in the same category as their Midwestern brethren in Indiana. Both states have relatively modest top incomes, with taxes not overly burdensome even in 40 percent and 60 percent brackets, totaling $261,255 and $316,539 respectively.

Kansas

• Average income of top 1%: $1,034,676
• Amount paid on a 50% tax rate: $412,026
• Amount paid on a 70% tax rate: $516,561

Kansas is one of the lucky states where the top 1 percent earn over $1 million on average. Higher marginal tax rates could end up taking more than half of that income, however; even a 60 percent rate would result in a tax bill of $464,293.

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Kentucky

• Average income of top 1%: $719,012
• Amount paid on a 50% tax rate: $254,194
• Amount paid on a 70% tax rate: $295,596

Kentucky has one of the lowest national average incomes for the top 1 percent, and taxes are similarly low. If rates were to jump up to 70 percent, the average top earner would still lose less than 42 percent to taxes. A jump to 40 percent would result in taxes of “just” $233,493.

Louisiana

• Average income of top 1%: $814,386
• Amount paid on a 50% tax rate: $301,881
• Amount paid on a 70% tax rate: $362,358

The sportsman’s paradise of Louisiana boasts a moderate income of $814,386 for the average top 1 percent in the state, but a rise in marginal tax rates could end up taking a decent bite out of that income. Taxes on an average top earner would rise by over $100,000 if the 70 percent tax bracket becomes a reality.

Maine

• Average income of top 1%: $655,870
• Amount paid on a 50% tax rate: $222,623
• Amount paid on a 70% tax rate: $251,397

Top salaries in Maine are only about 15 times the state average salary, which is low compared with other states. Increases in marginal tax rates won’t have a huge effect on the top 1 percent in Maine, with taxes rising to just $251,397 in a theoretical 70 percent bracket from the $203,921 paid in the current top bracket of 37 percent.

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Maryland

• Average income of top 1%: $1,135,718
• Amount paid on a 50% tax rate: $462,547
• Amount paid on a 70% tax rate: $587,290

Maryland’s richest 1 percent could face more than $200,000 in additional income tax if the top marginal rate pops from 37 percent to 70 percent. Even a 60 percent tax bracket would result in taxes of $524,918 on an average top salary of $1,135,718.

Massachusetts

• Average income of top 1%: $1,904,805
• Amount paid on a 50% tax rate: $847,090
• Amount paid on a 70% tax rate: $1,125,651

Earning $1,904,805 sounds great, but that average income of the top 1 percent in Massachusetts would be decimated by a jump in marginal tax rates. A 60 percent marginal rate would result in nearly $1 million in taxes.

Michigan

• Average income of top 1%: $917,701
• Amount paid on a 50% tax rate: $353,538
• Amount paid on a 70% tax rate: $434,678

No one likes paying more taxes, but the increased burden on Michigan’s richest 1 percent wouldn’t be as bad as in some other states if marginal rates were to go up. A 60 percent marginal rate, for example, would result in average taxes of $394,108 on those top earners.

Minnesota

• Average income of top 1%: $1,185,581
• Amount paid on a 50% tax rate: $487,478
• Amount paid on a 70% tax rate: $622,194

High-earning Minnesotans are already used to high taxes, paying out $399,914 on average at the current 37 percent marginal rate. Things will only get worse if rates were to tick higher, with a 60 percent marginal rate taking nearly half the average top 1 percent’s income.

Mississippi

• Average income of top 1%: $580,461
• Amount paid on a 50% tax rate: $184,918
• Amount paid on a 70% tax rate: $198,610

Mississippi has one of the lowest incomes in the country on an average basis, but the state is one in which earning $100,000 is enough to make you rich. However, even in this low-cost state, the top 1 percent still clear $580,461 on average. At the current top marginal rate of 37 percent, that amounts to a $176,020 tax bite. An increase to a 60 percent marginal rate would only kick that tax bill up to $191,764.

Missouri

• Average income of top 1%: $944,804
• Amount paid on a 50% tax rate: $367,090
• Amount paid on a 70% tax rate: $453,650

Top earners in the Show-Me State earn just under $1 million per year, and their tax burden is fairly average on a national level. Increases in the marginal rate will reduce take-home pay, but not as bad as in some other states. For example, a 60 percent marginal rate would still result in a net of $534,434 for the state’s wealthiest 1 percent.

Montana

• Average income of top 1%: $855,976
• Amount paid on a 50% tax rate: $322,676
• Amount paid on a 70% tax rate: $391,471

Top incomes in Montana are on the low side, relatively speaking, but the upside is the low relative tax burden. In a 60 percent tax bracket, the top 1 percent in Montana will only pay about 42 percent of their income in tax.

Nebraska

• Average income of top 1%: $945,869
• Amount paid on a 50% tax rate: $367,622
• Amount paid on a 70% tax rate: $454,396

Nebraska is pretty near the national average when it comes to top earners and taxes. If brackets rise to 60 percent, the average top 1 percent earner in Nebraska will still take home $534,860.

Nevada

• Average income of top 1%: $1,354,780
• Amount paid on a 50% tax rate: $572,078
• Amount paid on a 70% tax rate: $740,634

Incomes are rosy at the top in Nevada, with the top 1 percent earning over $1.3 million on average. It’s a good thing there’s no state income tax in Nevada, however, as a rise in federal marginal rates could result in a tax bill as high as $740,634 on top incomes.

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New Hampshire

• Average income of top 1%: $1,134,101
• Amount paid on a 50% tax rate: $461,738
• Amount paid on a 70% tax rate: $586,158

New Hampshire’s highest paid earn more than $1.1 million on average, but high taxes take a big bite out of that income. In a 60 percent bracket, the state’s top 1 percent would pay more than nearly $524,000 in taxes.

New Jersey

• Average income of top 1%: $1,581,829
• Amount paid on a 50% tax rate: $685,602
• Amount paid on a 70% tax rate: $899,568

Top salaries in New Jersey are among the highest in the nation, but a rise in marginal tax rates could translate into a huge drop in take-home pay. If rates rise from the current top rate of 37 percent to 70 percent, New Jersey’s richest 1 percent would face an incredible $350,000-plus in additional taxes.

New Mexico

• Average income of top 1%: $615,082
• Amount paid on a 50% tax rate: $202,229
• Amount paid on a 70% tax rate: $222,845

New Mexico’s wealthiest 1 percent earn one of the nation’s lowest average salaries, but they also have less to fear of the tax man. For every 10 percent rise in the marginal rate, New Mexico’s top earners would only pay about $10,000 in additional tax.

New York

• Average income of top 1%: $2,202,480
• Amount paid on a 50% tax rate: $995,928
• Amount paid on a 70% tax rate: $1,334,024

Home to some of the country’s wealthiest zip codes, New York has a combination of high earners and high tax rates. Top-earning New Yorkers would end up paying nearly $1 million in taxes on average with even a 50 percent marginal rate; a 70 percent rate would be confiscatory, taking over $1.3 million of the average top earner’s $2,202,480 income.

North Carolina

• Average income of top 1%: $902,972
• Amount paid on a 50% tax rate: $346,174
• Amount paid on a 70% tax rate: $424,368

The tax burden for North Carolina’s richest 1 percent would rise rapidly with an increase in marginal tax rates. If the top bracket rose from the current 37 percent to 60 percent, top earners in North Carolina would pay about $90,000 in additional tax.

North Dakota

• Average income of top 1%: $1,080,845
• Amount paid on a 50% tax rate: $435,110
• Amount paid on a 70% tax rate: $548,879

Perhaps surprisingly, top earners in North Dakota pull down over $1 million on average. While tax burdens at lower marginal brackets are not bad, higher rates would be crippling to take-home pay figures. Even a 60 percent bracket would claim nearly half of a high earner’s income.

Ohio

• Average income of top 1%: $858,965
• Amount paid on a 50% tax rate: $324,170
• Amount paid on a 70% tax rate: $393,563

Ohio’s top 1 percent would end up with more in take-home pay than in some other states if marginal rates were to rise. In a 60 percent bracket, top earners would still take home more than $500,000, even starting from a below-average income.

Oklahoma

• Average income of top 1%: $932,520
• Amount paid on a 50% tax rate: $360,948
• Amount paid on a 70% tax rate: $445,052

Oklahoma is a middle-of-the-road state when it comes to the income of the top 1 percent and their tax burden. The average tax bill in the 40 percent bracket would be $318,896, jumping to $403,000 in the 60 percent bracket.

Oregon

• Average income of top 1%: $908,898
• Amount paid on a 50% tax rate: $349,137
• Amount paid on a 70% tax rate: $428,516

Oregon’s top earners make less than both their northern (Washington) and southern (California) neighbors, but they would still suffer from increases in the marginal tax rate. The top 1 percent in Oregon can expect to pay about $40,000 in additional taxes for every 10 percent rise in marginal tax rates.

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Pennsylvania

• Average income of top 1%: $1,100,962
• Amount paid on a 50% tax rate: $445,169
• Amount paid on a 70% tax rate: $562,961

Pennsylvania’s average income of over $1.1 million for its top 1 percent is among the nation’s highest. A 60 percent marginal tax rate on that income would result in a tax bill of over $500,000.

Rhode Island

• Average income of top 1%: $928,204
• Amount paid on a 50% tax rate: $358,790
• Amount paid on a 70% tax rate: $442,030

Rhode Island is another state with a top average income of just below $1 million. Taxes for these top earners would go up by about $42,000 for every 10 percent jump in marginal tax rates, up to $442,030 for a hypothetical 70 percent tax bracket.

South Carolina

• Average income of top 1%: $761,185
• Amount paid on a 50% tax rate: $275,280
• Amount paid on a 70% tax rate: $325,117

A bump up in marginal tax rates won’t have as much effect on South Carolina’s top 1 percent as in some other states. A jump in marginal rates from 37 percent to 60 percent will only trigger additional taxes of about $57,000, not a huge amount on the average 1 percent income of $761,185.

South Dakota

• Average income of top 1%: $1,130,048
• Amount paid on a 50% tax rate: $459,712
• Amount paid on a 70% tax rate: $583,321

High earners in South Dakota are blessed with incomes over $1.1 million on average, but a bump in marginal tax rates would be devastating. Even a 60 percent rate would take more than half of those earnings, and a theoretical 70 percent marginal rate would cost earners a whopping 68 percent.

Tennessee

• Average income of top 1%: $947,021
• Amount paid on a 50% tax rate: $368,198
• Amount paid on a 70% tax rate: $455,202

The top 1 percent in Tennessee earn nearly $1 million on average, but their tax burden is not as high as in some other states. If rates rise to 40 percent, the average tax bill will only be $324,696, and even a 60 percent rate will only raise that bill to $411,700.

Texas

• Average income of top 1%: $1,343,897
• Amount paid on a 50% tax rate: $566,636
• Amount paid on a 70% tax rate: $733,015

Top earners in Texas take home some of the biggest paychecks in the nation. These richest 1 percent are no doubt grateful that they don’t owe any Texas state income tax because their federal tax bill will be quite large if rates rise. In a theoretical 60 percent tax bracket, the top 1 percent in Texas could expect to pay almost $650,000 in tax.

Utah

• Average income of top 1%: $1,057,066
• Amount paid on a 50% tax rate: $423,221
• Amount paid on a 70% tax rate: $532,234

Utah is one of the few states in the nation where the top 1 percent earn over $1 million on average. An increase in marginal tax rates will send anywhere from 35 percent to 50 percent of that income to the federal government.

Vermont

• Average income of top 1%: $816,579
• Amount paid on a 50% tax rate: $302,977
• Amount paid on a 70% tax rate: $363,893

The average income of top earners in Vermont is far below that in high-income states like New York, but Vermont’s top 1 percent would keep more of their income in a higher-tax environment. For example, at a 60 percent marginal tax rate, the top 1 percent in Vermont would take home almost 60 percent of their pay, at $483,144 on average.

Virginia

• Average income of top 1%: $1,109,984
• Amount paid on a 50% tax rate: $449,680
• Amount paid on a 70% tax rate: $569,276

Hosting the nation’s wealthiest Congressional district, Virginia is another state where the top 1 percent earn in excess of $1.1 million but face a large tax burden. Increasing marginal rates will dramatically reduce take-home pay, with high earners in the state only taking home about $600,000 — or just over half of their salary — in a theoretical 60 percent bracket.

Washington

• Average income of top 1%: $1,383,223
• Amount paid on a 50% tax rate: $586,299
• Amount paid on a 70% tax rate: $760,544

The top 1 percent in Washington earn nearly $1.4 million on average, but taxes are high. A 70 percent marginal rate would drop take-home pay to $622,679.

West Virginia

• Average income of top 1%: $535,648
• Amount paid on a 50% tax rate: $162,512
• Amount paid on a 70% tax rate: $167,241

West Virginia has the lowest average income in the country for the top 1 percent of earners, at $535,648. As a result, an increase in marginal tax rates won’t impair that income very much. If a 70 percent marginal rate were to ever be approved, the tax bill on top incomes would only rise from $159,439 to $167,241.

Wisconsin

• Average income of top 1%: $964,358
• Amount paid on a 50% tax rate: $376,867
• Amount paid on a 70% tax rate: $467,338

Earnings for the average top 1 percent earner in Wisconsin approach $1 million, but increasing tax rates would trim a big chunk of their take-home pay. For every 10 percent rise in marginal tax rates, Wisconsin’s highest earners would pay an additional $46,000 or so in taxes.

Wyoming

• Average income of top 1%: $1,900,659
• Amount paid on a 50% tax rate: $845,017
• Amount paid on a 70% tax rate: $1,122,749

Wyoming is one of the few states where the top 1 percent of earners might face a tax bill of over $1 million. Even a 60 percent marginal rate would result in a tax bill of $983,883 for the average top 1 percent earner in the state.

Click through to read more about the best and worst countries for the rich.

More on Taxes

• Americans in These 5 States Have the Lowest Tax Bills, Study Finds
• States With Inheritance Tax
• How Much Money You Would Have If You Never Paid Taxes
• Watch: How to Legally Cheat Your Tax Bracket

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Methodology: GOBankingRates determined the impact of 70 percent tax on the wealthy by analyzing the incomes of the top 1 percent of households in each state, average incomes sourced from the Economic Policy Institute’s 2018 report, “The new gilded age: Income inequality in the U.S. by state, metropolitan area, and county.” Federal marginal tax rates of 40 percent, 50 percent, 60 percent and 70 percent for a single-filer (with standard $12,000 deduction) were applied to each state’s average income of the top 1 percent to calculate the taxes that’d be paid in lieu of the 37 percent top federal marginal tax rate currently in use per the Tax Cuts and Jobs Acts of 2017, which came into effect on Jan. 1, 2018. One federal income tax was applied, take-home income was then calculated for each tax bracket percentage.

About the Author

John Csiszar

After earning a B.A. in English with a Specialization in Business from UCLA, John Csiszar worked in the financial services industry as a registered representative for 18 years. Along the way, Csiszar earned both Certified Financial Planner and Registered Investment Adviser designations, in addition to being licensed as a life agent, while working for both a major Wall Street wirehouse and for his own investment advisory firm. During his time as an advisor, Csiszar managed over $100 million in client assets while providing individualized investment plans for hundreds of clients.

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