There are tax calculators from the campaign (i.e. October 2008-era), but has anyone done a new one for the bill that actually passed?

a similar family making $500,000 would get an $11,300 increase, according to the Deloitte analysis. Single filers with no children would be hit with even bigger tax increases.

Hence the distress amongst our working class media.

First, one must believe the Obama will keep his word and, secondly, one must believe that there is actually enough taxpayers out there making over 250K that he can soak enough to pay.

I don't believe either is the case.

Barack Obama plans to raise taxes on people who make more than $250,000, so the reporter has gone and found people who earn a little more than that sum who plan to decrease their income so that they come in underneath the magic line.

Surely this isn't merely a dumb news report, but a news report about dumb people. Assuming he actually did find people who were doing this dumb thing.

Wouldn't it be newsworthy if it were not hard to find people who deliberately lowered their income so they would have to pay less in taxes?

Reading the hundreds of comments on this story on ABC's website is pretty depressing. While a few commenters seem to get it, most seem to think either a) going over 250K will increase the tax rate on your total income, or b) all income over 250K will be confiscated. And most seem to think that in any case, it means money will be taken from the industrious and given to the lazy. Ezra, with only one or two exceptions, your commenters are much smarter than ABC's commenters.

I have never posted here before, but I have to comment on this because, as a volunteer for Obama during the campaign, I was dealing with this nonsense for MONTHS! People have NO idea how taxes work, and many, many people I talked to thought they would suddenly earn less once they made $250,000 in take home pay. This was, of course, on top of the Joe the Plumber problem: people thought that businesses were taxed on gross, not net. So if you had five employeed who were paid $50,000, that automatically meant you earned $250,000 and you'd be taxed on that.

Shame on ABC News if they did not explain the real situation. It's one thing for people to disagree on tax policy, but it's a completely different thing to willfully mislead people on how taxes work.

Hey, I'm willing to increase my income to over $250K a year and pay the extra tax! My boss said "no." Is that news?

What I'm waiting for some reporter to find or some Republican to produce is that ubiquitous small-business person they keep talking about who is reporting (adjusted gross) income over 250K and who would employ more workers if only his taxes would remain at current levels. It's high time they got called out on that fairy tale. Small businesses may create a lot of jobs but not unless there is demand for whatever they have to sell. You'll never fix this economy by cutting their taxes.

Point of clarifcation - Is ii individuals earning over $250,000 or couples earning that much? My understanding is that the $250K number refers to joint filers. If so, $125K for individuals is a much lower threshhold. That being said, most people are totally clueless about how tax rate effect marginal dollars earned - reporters included.

First, one must believe the Obama will keep his word

Funny, then, how Bush and the GOP introduced tax cuts in 2001 and 2003 that automatically expire on 1/1/2011, and cheerleaders like Vajima embraced the idea that they were lying about the sunset in order to stay within budgeting limits.

Grant- I believe it's $250k for joint filers (families) and $200k for individuals.

Under Obama's proposed plan, high income-earners ($250K+) will face an itemized deduction ceiling of 28% on deductions such as charitable giving and mortgage interest. In this case, it is possible that someone making $249,995 could take home more money than someone making $252,000, since the individual making $249K would be able to take advantage of the full deduction, while the guy making over $250k would not.

And that doesn't even take into account the higher taxation for cap gains and dividends on high income-earners.

My husband once spent over an hour on the phone with his father trying to explain marginal tax rates. I once spent a lunch with a coworker trying to explain that, no, you shouldn't turn down a raise because it will put you into the next tax bracket. This misinformation is all over the place, and many many people who really shouldn't be this wrong about these things never get the correct information.

As Nick pointed out, there probably are some situations where people right above the bracket threshold (probably a $100 range) that could result in a lower post-tax income than someone under the bracket threshold -- those situations probably arise from the tax tables (since very few people calculate the rates on each bracket of income). However, the potential range is so small enough that typical mutual fund distributions or checking account interest (only reported after the end of the year) would be larger than such range. I doubt that anyone with a bank account could predict being in that narrow income range before the end of a year.
The argument about marginal rates is generally correct but there are a few exceptions. However, turning down a raise/income because of the potential exception is swallowing camels and straining at gnats.

nick, you don't expect us to take a very precisely and narrowly calibrated event like that seriously, do you? there are, roughly, 3M households who will be affected. if 1% of them fall into the category you describe, i'd be shocked.

as for el viajero, who knows what he means about obama "telling the truth," but sheesh, it's not like there's some great mystery about the percentage of income earned by the top 2% of tax filers by income: the top 1% is north of 20% of all income, and the incremental next 1% adds a few percent of income more, something like 5 or so, so roughly speaking, 25% of net income is paid to those making $250K or above.

what's the confusion?

it's worth remembering, of course, that what we're talking about here has an evidentiary precedent, the 1993 clinton tax hike. you can look up the results.

Great, we're making progress. In the comments section of this blog post alone we've gone from "look, the rubes can't even figure out the marginal tax system," to "well, it'll only affect a few people."

No mention of the disincentive to work for every dollar earned over $250k. I'd imagine many will choose leisure over labor once they have reached the magical threshold as set by "The One."

Buy hey, who cares, right? Soak the rich! I needs me a flat panel television!

No mention of the disincentive to work for every dollar earned over $250k.

Is there a disincentive that currently keeps people from working for every dollar over $357,700 right now?

Surely you can prove this. Or perhaps you can just imagine it, since you appear to have a very creative imagination.

nick, you've got to be kidding.

what 2 of us have said is that there is an extremely unlikely set of circumstances in which it could possibly work out that there was such a thing as a better situation to earn 249,999 than to earn 250,001.

not to put too fine a point on it, but concluding from that there is something to talk about is really quite silly.

let us repeat the basics for your edification: a.) we have empirical evidence - the clinton years - that this theoretical posture is quite simply wrong. continuing to repeat it as though there were no evidence is a sign of a propandist at work; b.) the essential basis for the current rates high-income individuals endure is that george bush stole the social security surplus with the assistance of the republican congress and used it in a regressive manner, lowering rates on the high-end and making up for it by pocketing the FICA pre-payment dollars lower-income individuals were paying and claiming that the IOUs were meaningless; c.) by refusing to cut spending (indeed, by spending in a deranged way on iraq and in a number of other specific areas) while insisting on even more tax cuts in 2003, bush guaranteed that taxes would have to go up in the future. selfishly, he wanted a boom in his time; like everything else the pathetic little man touched, it turned to shit; d.) the idea the difference between mid and upper 30s and the possibility that someone will actually say jeez, i'm keeping $30 less of every additional $1000, i ain't bothering to work any more is irrelevant to the economy as a whole because the work we are talking about is almost entirely fungible (this plumber, or lawyer, or accountant, or what have you doesn't want to do it and someone else will). there is no harm done to the economy as a whole because of the "leisure" preference of a tiny number of people, and to argue there is is to betray your shallowness of knowledge.

btw, loved your closer: clever negro dialect there, sonny. what a marooooooon.

Um, the 28% cap on mortgage interest and charitable deductions for 250k+ earners is not some punitive measure; it merely equalizes those taxpayers with folks in a lower bracket, who were already getting a 28% deduction. So no, I don't think Nick's example works in the slightest.

I still don't know who these people are that will toil away at a marginal rate of 35% but will forsake all sorts of income in order to avoid exposure to the confiscatory 39% rate; again, sure is a wonder that the economy boomed in the 90s even though everyone was supposedly disincentivized from working. Remember, 35% is country first, 39% is socialism!

H-Bob: "those situations probably arise from the tax tables (since very few people calculate the rates on each bracket of income)"

Huh? The tax tables already take the income brackets into account. That's what they're for.

Um, the 28% cap on mortgage interest and charitable deductions for 250k+ earners is not some punitive measure; it merely equalizes those taxpayers with folks in a lower bracket, who were already getting a 28% deduction. So no, I don't think Nick's example works in the slightest.

I believe that when AMT rules were in effect, deductions were effectively capped at 28% to begin with. So the people who claim that they would have been hit by the 28% deduction limit were likely paying AMT beforehand, anyway.

And Nick had to reach for this example, because none of the people in the article, nor the pro-GOP talking head mentioned it: none of them actually understand how marginal tax rates works.

No mention of the disincentive to work for every dollar earned over $250k.

Under the current tax regime, 500,000 people received a disincentive to work in the form of being involuntarily escorted from the premises. Hard to see how the current situation has helped them.

And I didn't mention it explicitly, the AMT has been repealed. So something had to make up for the AMT-style deduction cap.

Also, revision that last paragraph to make things clear:

Under the current tax regime, 500,000 people just last month received a disincentive to work in the form of being involuntarily escorted from the premises.

H-Bob: "those situations probably arise from the tax tables (since very few people calculate the rates on each bracket of income)"

Huh? The tax tables already take the income brackets into account. That's what they're for.

I'm not trying to make excuses for stupidity, but the tax tables actually do cause small increases in income to result in larger increases in taxes, albeit in a very minor way. In the 2008 tax tables, for example, if your taxable income is $50,049, your tax if you're single is $8,850. If your taxable income is one dollar more, $50,050, your tax is $8,863. One extra dollar of income has resulted in thirteen extra dollars of tax. Oh the humanity!