--- title: 'Taxing the rich: There are limits' description: The 2010 fiscal year for most states began July 1. Facing severe budget shortfalls, some states have used the new year to introduce higher income… authors: - name: timestaff url: https://money.com/author/timestaff/ articles: 459 covers: - Banking - Career Advice - Credit - Credit Cards - Housing - Identity Theft - Insurance - Investing - Lifestyle - Loans - Mortgages - Personal Finance - Professional Services - Retirement - Shopping - Taxes former_staff: true published: '2009-07-16T15:00:53.000Z' modified: '2009-07-16T15:00:53.000Z' section: Economy and Politics word_count: 288 canonical: https://money.com/taxing-the-rich-there-are-limits/ type: Article source: structured-blocks --- > **Disclosure:** We research all brands listed and may earn a fee from our partners. Research and financial considerations may influence how brands are displayed. Not all brands are included. [Learn more](https://money.com/page/disclaimer/). ![Taxing the rich: There are limits](https://money.com/img/logo-social.png) The 2010 fiscal year for most states began July 1. Facing severe budget shortfalls, some states have used the new year to introduce [higher income tax rates](http://taxfoundation.org/taxdata/show/228.html "State tax rates"). In Delaware, for example, the highest tax rate went from 5.95% to 6.95% on earnings over $60,000. In Hawaii, the maximum tax rate jumps from 8.25% to 11% for earnings above $200,000. And in New Jersey, the tax on earnings above $500,000 jumps to 10.25%, up from 8.97%; for a new bracket above $1 million, the rate is 10.75%. As you can see, most of the tax increases are limited to high earners, the same tactic [President Obama has proposed](http://money.cnn.com/2009/07/14/news/economy/health_care_reform/index.htm) to help pay for expanded health-care coverage and other government spending measures. But as Mark Robyn points out in [his post](http://www.taxfoundation.org/blog/show/24861.html) for Tax Policy, a blog for the non-partisan [Tax Foundation](http://taxfoundation.org "Tax Foundation"), raising taxes on the wealthy doesn't always have the desired effect. As some states have discovered, high earners have the means to [move](http://www.taxfoundation.org/blog/show/24714.html). The well-off also can afford to hire smart accountants to lower their tax bill. ![](http://content.money.com/wp-content/uploads/2009/07/stack_money1-ju-032.jpg) That's not to say that wealthy folks shouldn't be taxed at a higher marginal rate. But the strategy seems like a shortsighted way for the federal government to raise the funding needed to fix health care. Howard Gleckman makes the point in [his post](http://taxvox.taxpolicycenter.org/blog) for the non-partisan [Tax Policy Center](http://taxpolicycenter.org)'s blog, TaxVox. What's the alternative? Len Burman, director of TPC, offers one option in this [May editorial](http://www.washingtontimes.com/news/2009/may/19/different-way-to-pay-for-health-reform/) in *The Washington Times*. In the meantime, Obama can witness firsthand just how well targeted tax hikes work: While higher state tax rates were introduced this month, the rates are retroactive to January 1, 2009. 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