Deal on Taxes Hits Wealthy in New Jersey and New York

lya Marritz over at WNYC News has written: As 2013 begins, you can expect to pay more taxes as a result of the deal Congress reached on New Year's Day. But not everyone's taxes go up equally, and different regions of the country are affected different ways.

 
WHO IS AFFECTED
Rich people. Around 22,000 New Yorkers earn $1 million or more a year, and people in this category will bear the brunt of new taxes. The top income tax rate on earnings above $400,000 (for individuals) and $450,000 (for families) rises from 35% to 39.6%.
 
NOT ALL RICH ARE AFFECTED EQUALLY
The capital gains tax rate will rise from 15% to 20%, the same as it was at end of the Clinton Administration.  This will particularly affect large number of New Yorkers and New Jerseyans working in hedge funds, private equity, and other industries where workers' income comes mainly from investments, not wages.
 
CHARITABLE GIVING COULD BE AFFECTED. OR NOT.
Itemized deductions will be limited for high earners under the new agreement.
It's complex, but for individuals who make over $250,000, or families couples making over $300,000, for each dollar in of additional income, itemized tax deductions will be reduced.
Some tax-scholars say the change probably won't reduce overall charitable giving. But one major philanthropist – Mayor Michael Bloomberg - emphatically disagrees.
“In a world where we are defunding education and the arts and social services both at the state and federal level, to make it more difficult for people to give charitable contributions is about as crazy a thing as I've ever heard,” Bloomberg said on Wednesday.
 
EVEN LOW- AND MIDDLE INCOME PEOPLE WILL PAY HIGHER TAXES
That's because payroll taxes — the taxes that fund social security - were temporarily lowered as an economic stimulus. Now they will go back up, rising by two percent. The New York City Comptrollers estimates New Yorkers will pay $868 more in taxes in 2013.
Congress, however, did extend for five years some programs that help the poor and working class, including the Earned Income Tax Credit and Child Tax Credit.  Long-term unemployment insurance was also extended; more than 300,000 people in New York and New Jersey were at risk of losing benefits.
 
WHAT’S NEXT
Even though Congress reached a deal on revenue, they couldn't agree on spending cuts.
If there's no agreement within two months, automatic cuts will kick in. New York State Comptroller Thomas DiNapoli said New York will lose more than $600 million in federal aid for housing, education, and healthcare.

ExactCPA Commentary.  Top income bracket taxpayers will be impacted by new fiscal cliff legislation increasing the top individual tax rates for this group.   New Jersey and New York are the 3rd and 16th richest states respectively according to 247wallstreet.com.  This is based on 2011 median household income.  That being said, it looks like proportionately more taxpayers will be affected by the new rate increases on high-income tapayers than those in other parts of the country.  Tax planning will be important for the taxpayers this year as they begin to navigate the new higher tax rates.