Americans Losing Money to Spite Uncle Sam
In “Upper-Income Taxpayers Look for Ways to Sidestep Obama Tax-Hike Plan,” ABC’s Emily Friedman reports on a disturbing trend:
President Barack Obama’s tax proposal — which promises to increase taxes for those families with incomes of $250,000 or more — has some Americans brainstorming ways to decrease their pay, even if it’s just by a dollar.
A 63-year-old attorney based in Lafayette, La., who asked not to be named, told ABCNews.com that she plans to cut back on her business to get her annual income under the quarter million mark should the Obama tax plan be passed by Congress and become law. [...] “We are going to try to figure out how to make our income $249,999.00,” she said. “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,” she added. “Why kill yourself working if you’re going to give it all away to people who aren’t working as hard?”
Granted, so far the trend consists of just two people plus some speculation about others following.
Two people, incidentally, who seem to be clueless about how our tax system works despite being successful at generating income. We don’t tax people earning the trigger point for a new bracket at one rate and those a dollar below it at a different rate. Rather, we tax income incrementally so that everyone pays the same rate on the first X income, the same rate on the next bracket, the same rate on the next bracket, and so on. So, all things being equal, earning the next dollar still results in a net gain of income to the individual; it’s just less than the net on the previous dollar.
Mind you, I’m not in favor of raising taxes on high earners. It actually does create disincentives to work. But I do get the sense that many of the people talking about — and even reporting on — the issue don’t understand it.
Hat tip: Jawa Report