These are apparently the people our new friend Zantabak thinks are the smart ones... http://www.washingtonmonthly.com/archives/individual/2009_03/017127.php RICH MORONS DECREASING OWN INCOME... When it comes to policy issues like the federal tax code, it's easy for people to get anxious and confused. Ideally, we'd have professional journalists and responsible news outlets that can help the public get the facts they need. In reality, however, we have a few too many reports like this one from ABC News' Emily Friedman. The premise of the piece is, on its face, odd. ABC News found wealthy Americans in the top 2% of wage earners who are, believe it or not, actively trying to figure out how to lower their income. Apparently, these folks have heard that President Obama wants to raise taxes on those who make more than $250,000 a year, so ABC spotlighted some of these folks who are seemingly desperate to get to below the threshold. One lawyer in Louisiana said, "We are going to try to figure out how to make our income $249,999.00.... We have to find a way out where we can make just what we need to just under the line so we can benefit from Obama's tax plan. Why kill yourself working if you're going to give it all away to people who aren't working as hard?" Jon Chait described this as possibly the dumbest news report he's ever seen. Now, the obvious here is that the tax code doesn't work that way. A tax increase effects the marginal dollar that a person gains. That's means only every dollar over $250,000 is taxed at a higher rate. Obama is not proposing a tax system whereby somebody who goes from $249,999 to $250,000 suddenly becomes poorer. Nobody has ever enacted a tax hike like that in the history of the United States. [...] The article then quotes a financial advisor who explains the way that tax brackets rates work, but then quotes a right-wing business professor and the subjects of her article fulminating about class warfare. Pretty clearly the reporter started off on her mistaken premise, found some subjects who shared her ignorance, and then came across a financial advisor who gently corrected her. But, instead of nixing the collosally uninformed article, or writing a different kind of article ("Rich Morons Decreasing Own Income Due To Lack of Tax Code Knowledge") she instead plowed ahead with her initial premise. Jamison Foser, who called ABC News' report "stunningly wrong," also explained: The ABC article is based on the premise that an individual's entire income is taxed at the same rate. If that were the case, it would be possible for a family earning $249,999 to have a higher after-tax income than a family earning $255,000, because the family earning $249,999 would pay a lower tax rate. But that isn't actually how income tax works. In reality, a family earning $255,000 will pay the higher tax rate only on its last $5,001 in income; the first $249,999 will continue to be taxed at the old rate. So intentionally lowering your income from $255,000 to $249,999 is counter-productive; it will result in a lower after-tax income. The people ABC quoted don't seem to understand that. Worse, ABC doesn't seem to understand it, either. There's no excuse for journalism that's this bad. Americans need professional news outlets that debunk misconceptions like these, not fuel the fire of ignorance.
I suppose that it would be even more futile to try to explain the concept of AMT relief to these people which will counteract even the marginal rate increase (depending on where they live)
The idea of the article is correct. However, some might feel that the amount they pay to Uncle Sam on that marginal income over $250k does not justify the trouble of working for it.
Lies smies!11 Anything with Obama and relief in the same sentence is some form of handout to the poor.
Business school and law school are for people who cannot do math. My ChemE prof always said your boss will not care about your problems. Your frantic phone call will find him on the golf course where he pretend to care about your problems and then think to himself "WTF do I care, I have an MBA"
So big texxxx, let's say you make 400,000. If you worked harder, you could make 500,000. Until 2011, if you make another 100,000, you get to keep $64,000. However due to Obama not implementing an additional tax cut in 2011, in that year you will only get to keep $61,000 - accordingly, in order to forego losing $3000, you will voluntarily forfeit $61,000, and work less. The underlying assumption is that you are at that point along your indifference curve, where additional work is not worth $61,000 to you, but is worth $64,000 - could you provide an explanation as to 1) why you would feel this way, and 2) your assumption that many people are at this point in their indifference curves. GRACIAS IN ADVANCE
so some feel paying an extra 2-4% of marginal income earned is sooooo burdensome that they won't work more? wow. how do idiots make so much money?
let's just say the tax situation has prompted us to think about my wife quitting work, and getting rid of our babysitter. this year we'd have actually gotten a substantial refund, instead we owe a considerable amount (it's about a $30k swing- not even close). next year our income will be substantially lower than this year, but if my wife were to quit, we'd probably have more take home pay. but our babysitter, who's been with us for 6 years, would be SOL. trickle down poverty- sucks for everyone.
this would probably be the perfect storm of being able to argue against tax increases. For 2 income families it is easier to drop in income. Most people cannot just walk in their company and declare they are no longer working weekends and will take a 30K drop in pay. I think overall a small increase back to the Clinton levels are needed at this point with our huge deficit. Even though no tax increase will touch the close to 2 trillion deficit we will run.
Poor logic, Sam. I like how you introduced the indifference curve into the discussion, but your attempt to win an argument by claiming the other person's position is absurd demonstrates weak logic. Please try harder. GIA
Isn't the top bracket will go from 35 to 39.6? That would be $4600 in difference? Regardless, you have to take into account the additional cost of making that extra money. Its not just about the after tax money you gain. I already went through the situation basso described, all my wife's income was being taxed at the top bracket even though her income weren't that high. So instead of paying for 2 daycares and transportation cost, she decided to stay home with the kids.
In that case you and your wife are as dumb in real life as you act on this BBS and should seek professional tax advice (or use common sense). You wife quitting her job now in 2009 will result in zero tax consequences in tax year 2011, which is when the marginal rate cuts expire.
Hence the concept of the indifference curve So? then your wife should get a higher paying job or get cheaper day care or transportation. I could get a job working at a McDonald's in Southern New Jersey, but the transit costs and taxes would make it prohibitively expensive - is that an argument for lowering taxes? Or are you lobbying for some sort of child care deduction (which you already get as you claim them as dependents)
i'll take it step further- we've been renting for years, but are now at a point where we'd like to step back into the housing market (that mortgage deduction sure would help). but obama's mortgage bailout will continue to prop up prices (they've fallen, need to fall far further to be reasonable) meaning we're still priced out. the "irresponsible" loans are not available to the responsible. we'd have to move, likely to philly to find something truly affordable. bonus upside to a move, the net tax savings of Pennsylvania vs. NYC (state and local taxes) is about 7-8%. really wanted to raise our kids in NYC, but doesn't look like we can afford to, even tho, by Obama's calculations, we're "rich." i can't afford my own mortgage, because i'm stuck paying for yours (the royal "Yours").
What is the point of this article, other than there are at least 2 individuals who do not understand the tax code? This is an irrelevant point and thread. I guess the libs just need to distract attention away from Obama's failings. Major, will you please contribute to this site? Isn't it embarrassing to you that you haven't done this yet? Is Clutch's work just not worth it to you?
NYC has got to be one of the worst places to raise children. It would be a great place to visit with children, though. I currently own a home, and am ready to buy a bigger, but if I sell the one I have now, then the loss would wipe out what I've saved for my upgrade. If the market falls further, it will only make it more difficult. Of course there are still incentives. Obama offers the following to first time buyers. $8,000 Refundable Tax Credit to First Time Buyers If the owner lives in the home for 3 years or more, they will not have to repay the credit Should apply to all closings from Jan 1, 2009 - Nov 30, 2009. This plan will replace the current $7,500 Tax Credit which started in April of 2008 Both/All buyers must be first time home owners. Obama is going to give you a tax credit which you won't have to repay if you live in your home for 3 years. That's a pretty good deal. Anyway, best of luck with the new place. It seems like there will always be something that needs to be done, but it is nice owning, and not watching the rent money go to nowhere.
LOL - so basso, since you're going ot be the guinea pig, let's just put it on the table - for your family 's taxes to increase under Obama's plan, factoring in AMT relief, for which you would be eligible due to , your total taxable income would be at or over the $400,000 range. I'm going to assume that's true even though it's probably not. Once you are over that, you would really start to feel the pain of the additional marginal increase, to the tune of an extra $0.04 on every dollar you earn - OUCH! and an extra 10 cents for every dividend payment you get (I think, somebody correct me). At today's prices, one can afford a nice 2BR in Manhattan for $1mm. Doing the mortgage math, assuming you put the standard 20% down - your montly payment on a 30 year fixed is about $4000 per annum. Add in maintence and that's probaly a $5500 monthly (most of which will be tax deductible). So you are saying that, with your $500,000 income, you will not be able to afford your $70,000 annual housing expenses (less the mortgage interest tax savings & first time home buyer credit, which kicks them down to $50,000 or so....which can't be much different from your rent now if you do indeed make $500,000) becausee the last $100,000 will only net you $61,000 and not $64,000 ...... starting in 2011.... Pardon me because my bullsh-t detector just broke. You're either a complete liar or a complete idiot when it comes to personal finance. That is all.
