It depends on what deductions you have; more deductions mean a higher marginal rate. We pay really high property tax, school taxes, and a state income tax around 7.6%. So, big Schedule A deductions normally. When the phase outs kick in, you lose the personal exemption in pieces, and then a portion of your deductions disappear. In my case, my marginal rate was 56%.

Ok, I assume you know what you are talking about but help me understand.

Lets say I'm a married filer making $309,900 AGI in California. I've got a million dollar house with an 800k mortgage at 4%. I pay 1% in property taxes. So mortgage interest is $32,000, property tax is $10,000, and California taxes (after those deductions) are $20,040. So my federal deduction is $62,040, making my Federal taxable income $247,860, for a Federal tax bill of $57,698. By the way, my marginal Federal rate here is around 30%, and total marginal rate of 40.6%.

Now lets say I earn an extra $1000. Now I've got phase outs! California taxes (after full deductions) are $20,133. So my federal deduction is $62,133, minus 3% of $1000, for a final deduction of $62,103. My Federal taxable income $248,797, for a Federal tax bill of $58,008.

I made an extra $1000, and paid an extra $310 in taxes, making my marginal rate 31%. My marginal rate went up by only 1%. Even including my state marginal rate, SSI and Medicare, my marginal rate is 41.6%.

Now this excludes the personal exemption and standard deduction for simplicity. But the analysis is very similar for personal exemption phaseout -- two personal exemptions are normally equivalent to $8,000 deduction. Before the phaseout, an $8,000 exemption saves me $8,000*(marginal rate=40.6%), or $3,248. But say I'm $2,500 over the phase-out, the exemption is reduced by 2%, saving me only $8,000*0.98*(marginal rate=40.6%), or $3183. So the phaseout causes me to pay an extra $65 in taxes on an extra $2,500 in income -- increasing my marginal rate by 2.6%.

Since the deduction phaseout increases my marginal rate by 1%, and the exemption phaseout increases my marginal rate by 2.6%, both together will increase my marginal rate by 3.6%. Thus, my total marginal rate will increase from 40.6% to 44.2%.

I fail to see how a 56% marginal rate is possible, but I'd love to see an example.