Last year, Len Burman proposed a 4% surtax on AGI over $100k single/$200k joint. Now Congress is granting his wish in its own fashion. The phaseout of stimulus payments is mathematically equivalent to a 5% surtax on AGI over $75k/$150k. The phaseout "surtax" ends at $90k/$180k (based on one child), ensuring that the rich do not suffer unduly. Congress' most creative trick was to make this "surtax" retroactive to 2007. Very few of us can do anything about our 2007 AGI at this point, so this surtax will have no damping effect on reported taxable income. Anyone in the new phaseout range who thought he was paying a marginal rate of 15% on dividends and capital gains was mistaken. Probably he was already paying an effective marginal rate of 21.5% due to the phaseout of the AMT exemption (see http://fairmark.com/amt/ltcg.htm). Now the simple math of this rebate has retroactively boosted his 2007 effective marginal rate on dividends and capital gains all the way to 26.5%. His effective marginal rate on ordinary income has been boosted to 37.5%, well above the statutory marginal rate for million-dollar earners. Where are all the high fives from advocates of higher taxes? Or do they find themselves caught in a marginal rate trap of their own devise? I suppose to an economist this tax policy may seem reasonable, but it's not making much sense to me.