High earners in California and New York City would see a sharp uptick in taxes under the new proposal from House Democrats.

On Friday, Democrats on the House of Representatives Ways and Means Committee shared a 645-page tax plan that would raise the corporate rate to 26.5% as part of nearly $3 trillion in tax increases that they say will offset costs of their $3.5 trillion spending proposal.

The top rate for individuals would also rise to 39.6% from the 37% rate that was introduced in 2017. Sources tell Politico that a new 3% surtax on those making more than $5 million would also be included alongside a capital gains tax hike to 28.8% from 23.8%.

If enacted, it is projected that these tax increases would be especially felt by high-income earners in New York City and California. According to CNBC, top earners in New York City could face an income tax rate of 61.2% under the current proposals. This figure is not solely from an increase in federal taxes but is the cumulative total that factors in state and local taxes.

The combined top marginal state and city tax rate is 14.8% for high earners from New York City.

In California, those making more than $5 million a year pay a 16.8% income tax. With the new Democratic tax plan, Californians in upper-income brackets would face a combined 59.7% tax.

The tax hikes come after the 2017 tax bill that eliminated deductions for state and local taxes which, disproportionately hit New York and California. Despite the impact on the two states, Democratic lawmakers do not appear to have an interest in restoring what many viewed as a tax gift to the wealthy.

Sen. Joe Manchin, D-W.Va., has dismissed the Democrats' $3.5 trillion price tag for the budget bill. On Sunday, Manchin cited a lack of urgency to pass such a bill.

In an evenly split Senate, Democrats hope to pass the bill through the budget reconciliation process that only requires a majority of votes.

RELATED STORIES