Why is it stunningly stupid for “Upper-income taxpayers” to try to reduce their income to avoid proposed tax increases on those earning more than $250,000?
Is all that nonsense based on existing law, or on a proposed tax plan?
I’m not a tax expert, but I also was not aware that you are only taxed at the higher bracket’s rate for the dollars earned in that bracket. Is this new, or is that how it’s always been done? My W2 would seem to suggest I’m being taxed at a fixed rate, though maybe not. Maybe that’s just the estimate based on the total expected to be earned in the year…
That’s the way it always has been done. The tax rates go in brackets. A particular tax rate applies only to the income in that specific tax bracket.
So income between 0 and 10000 might be taxed at 10%
Income between 10001 and 25000 might be taxed at 15%
Income between 25001 and 50000 might be taxed at 20%
etc.
The media matters article is pointing out that the people trying to limit their income to below $250,000 do not understand how the tax system works. I hope it is not a financial adviser who is suggesting that they do that.
Now there’s a question you should be asking yourself.
According to the article that ran in the Seattle Times about the Obama Tax Plan:
“Under Obama’s budget proposal, a typical family of four making $300,000 a year would see their federal income taxes increase by $1,100, while a similar family making $500,000 would get an $11,300 increase, according to the Deloitte analysis.”
A typical family of four makes $300,000???
Maybe they meant “The typical tax increase…” The precise amount of your increase must depend on all that niggly stuff that keeps tax professionals in business; deductions, etc. The end tax increase on a single person making $300,000 would probably be a lot more.
I know a guy who quit a part-time job because it put him into the next tax bracket. He figured that of all the money he was earning from this second job, 75% was going to the government and he was going home with only a quarter of the pie.
Interesting dilemma.
That’s just as generous, cuz somebody else needs that job.
He was a hog grabbing up all the jobs when others are hungry for work.