President Obama wants to raise marginal income tax rates on incomes over $200,000 for single taxpayers and $250,000 for couples filing jointly. Here’s what the President doesn’t want you to know: it’s easy to avoid paying this onerous 4.6 percent tax increase. I’ll let you in on the secret, but fair warning, there’s some arithmetic involved. Start by figuring your total taxable income, then subtract $249,999.99. Write a check for the rest, payable to me. I’ll form a tax-deductible educational foundation called “The Marginal Tax Rate Education Fund,” and send you a receipt that will reduce your taxable income below the $250,000 threshold. Result: No Obama tax hike for you!
More info:
Rich People Who Don’t Understand Taxes Should Be Told So
UPDATE: Rich People Complain That Fiscal Cliff Deal Could Force Them To Pay Slightly Higher Taxes
While these wealthy investors grapple with the slight uptick in their tax rates, low-income Americans, seniors, and people with disabilities at the other end of the spectrum are bracing for devastating spending cuts to necessary entitlement programs Republicans hope to push as part of a deal to avert the so-called “fiscal cliff” early next year.
UPDATE: Faux News’ Gretchen Carlson also does not understand how marginal income tax rates work.
#1 by Richard Warnick on November 28, 2012 - 10:38 am
UPDATE: Faux News’ Gretchen Carlson also does not understand how marginal income tax rates work.
#2 by Richard's Fact Checker on November 28, 2012 - 12:01 pm
There is nothing Ms. Carlson says which is untrue. Media misstates what she said and what she did not say. She never said what MM says she said.
#3 by cav - FAT checker on November 28, 2012 - 12:19 pm
“I think the probability is we’re going over the cliff,” said Erskine Bowles
Nooooo!!! SHOOT the messenger.
#4 by Richard Warnick on November 28, 2012 - 12:25 pm
Higher pre-tax earnings always produce higher after-tax income. If the marginal tax rate for incomes over $250,000 goes from 35% to 39.6%, that 4.6% rate increase would apply only to taxable income in excess of $250,000. Apparently, Gretchen Carlson does not understand this.
Also, Carlson does not know that small-business owners have nothing to worry about. Tax Policy Center co-director William Gale:
#5 by Richard's Fact Checker on November 28, 2012 - 1:21 pm
There is nothing Ms. Carlson says which indicates she said or thinks what you are telling her that she said and thinks. You keep repeating the same thing but that is not what she said.
#6 by Richard's Fact Checker on November 28, 2012 - 1:28 pm
If the doctor in question now makes $300,000 per year, then it may be that she doesn’t want to pay any more than 35.0% + her state tax rate + whatever other taxes may be applied to her marginal income. From what she said and what Ms. Carlson said, she may be happy to pay at a marginal rate up to 35% plus plus but not above that rate. So she could limit her patients seen and limit the employees she has so that she only makes up to $250,000 and spend the rest of her marginal time golfing. Marginal rates are on marginal income and affect marginal behavior and marginal decisions. There is nothing the doctor said or Ms. Carlson said which would indicate otherwise. You are interpreting the general phrases they use to mean something specific. You and MM have no basis for the accusation.
#7 by Richard Warnick on November 28, 2012 - 1:57 pm
Here’s an idea: Hire an additional employee at $50,000 a year. That’s one way to beat the oh-so-onerous 4.6% tax rate increase ($2,300 in additional taxes on $50K). State and local income taxes are deductible from federal taxable income.
Or the doc could pay his/her fair share of taxes – there’s always that option!
#8 by Richard Warnick on November 28, 2012 - 2:10 pm
I ought to go into business as a financial adviser to rich people. If you pay more than 2% of your adjusted gross income for tax preparation fees, that’s deductible. I could charge the hypothetical doc $50,000 and he/she would be happy because I saved them $2300 in additional taxes.
#9 by Richard's Fact Checker on November 28, 2012 - 3:10 pm
You would get fired pretty fast since you just cost someone $50,000 to save them $2,300. Moronic.
#10 by Richard's Fact Checker on November 28, 2012 - 3:12 pm
“Or the doc could pay his/her fair share of taxes”
You could do that without raising her rates!
#11 by Richard Warnick on November 28, 2012 - 3:33 pm
The fantasy of raising a trillion dollars in revenue without touching income tax rates is just that, a fantasy.
What is Gretchen Carlson proposing? Basically the same thing.
#12 by Richard's Fact Checker on November 28, 2012 - 7:53 pm
No, she is suggesting that the doctor work less. Working less and spending $50,000 is not the same thing. When you work less you get to enjoy that time which has value to you and your family. If you spend $50,000 then you and your family do not get to enjoy that. You really don’t understand anything, do you?
#13 by Richard's Fact Checker on November 28, 2012 - 7:54 pm
“The fantasy of raising a trillion dollars in revenue without touching income tax rates is just that, a fantasy.”
Your sources showed it is very doable. You don’t like your own sources now?
#14 by cav - FAT checker on November 28, 2012 - 8:08 pm
If enough republican doctors voluntarily work less, for whatever reason, perhaps there’ll be opportunities for some of the many returning medic / veterans who now have this incredible experience in providing medical care, but with too few places to apply it.
Think of it as a ‘Job Share’ program.
#15 by Richard's Fact Checker on November 28, 2012 - 8:12 pm
Rational response to marginal tax rates in making the choice between leisure time and work is not confined to Republican doctors.
#16 by cav - FAT checker on November 28, 2012 - 8:28 pm
Precisely! Nor should it be limited by so much of the recour$e$ filtering to the top .0001%
The disparities are the problem.
#17 by Richard Warnick on November 28, 2012 - 11:02 pm
Going Galt to avoid a token 4.6 percent marginal tax rate hike is not a rational response. And remember, only 2-3 percent of small businesses will be affected by changing the top income tax rate.
#18 by Richard's Fact Checker on November 29, 2012 - 3:41 am
2-3% of employers hire 50% of employees.
It isn’t going galt. It is making choices based on the effort/reward ratios people face. At some point people choose leisure.
A 4.6 point increase is actually a 13% increase in marginal tax rates.
If it is just “token” then why have all of the other countries on the planet made such an effort to lower their rates?
#19 by Richard Warnick on November 29, 2012 - 9:24 am
Rich people can enjoy as much leisure time as they want to. All I ask is for them to pay their fair share of taxes. Which they are not doing, currently.
If low taxes create jobs, as the trickle-down economic theory says, then explain the last decade.
#20 by Richard's Fact Checker on November 29, 2012 - 9:36 am
I never heard trickle down economics mentioned once in all of my 2 degrees in the field.
We don’t have low tax rates. We have high tax rates. Rates matter.
The way to get the rich to pay more in taxes is to close all the loopholes. Buffett pays 10%. A no deduction code with a rate of 25% would increase his taxes by 150%. Is increasing Buffett’s taxes by 150% not a good thing? Increasing the top rate by 4.6% doesn’t even come close.
#21 by Richard Warnick on November 29, 2012 - 11:07 am
I tend to ignore the piteous whining. Tax rates for the wealthy are super-low. From Paul Krugman:
US companies are constantly complaining about their tax rates, which are the lowest in 40 years
If low tax rates are good for the overall economy, then why is U.S. income inequality so extreme? Why is poverty at an all-time high?
#22 by Richard's Fact Checker on November 29, 2012 - 11:17 am
We are talking about totally different things. But the solution is the same.
Marginal tax rates are too high. Effective tax rates are too low. The problem is the code, not the rates. If you raise rates on a bad code you have not solved the problem. Raising rates on a bad code will still result in low effective rates. There is no solution to the problem you observe without changing the code.
#23 by Richard Warnick on November 29, 2012 - 11:24 am
Congress isn’t going to tinker with the tax code. They only have ten working days left in this session, which makes it likely we will finally see the expiration of the Bush Tax Cuts For The Rich (most likely to be replaced next year by the Obama Tax Cuts For The Rich).
#24 by Richard's Fact Checker on November 29, 2012 - 12:18 pm
Tinkering with the tax code wouldn’t solve anything. It needs wholesale scrapping and re-writing.
#25 by Richard Warnick on November 29, 2012 - 1:50 pm
Well, I suppose President Obama could appoint a commission. But that’s how Washington gives reform proposals a decent burial.
#26 by Richard's Fact Checker on November 29, 2012 - 3:17 pm
“Well, I suppose President Obama could appoint a commission.”
He did. Done.
Next?
#27 by Richard Warnick on November 29, 2012 - 8:30 pm
The Catfood Commission was about the deficit (which nobody in Washington really cares about), not rewriting the tax code. It never produced a report. Anyway, what part of “burial” did you not get?
#28 by Richard's Fact Checker on November 30, 2012 - 7:20 am
See page 28:
http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf
#29 by cav - FAT checker on November 30, 2012 - 7:52 am
brewski. Is this not the official publication that never made it out of the cat-food committee – and is subsequently, really, not at issue?
Sure it cost the printer a pretty penny, but beyond that, not of much value given its delusional back-story. It’s almost as pretty as a clutch of Greenspan speeches from the 90′ and 00′s, and about as meaningful.
#30 by Richard's Fact Checker on November 30, 2012 - 8:29 am
It is a plan and it is a place to start. So no new study and no new commission needs to be formed. We have a document so start there. If the President or Congress want to adjust it then good. That is there job. But pretending that there is no plan is false.
#31 by cav - FAT checker on November 30, 2012 - 8:29 am
The quote was from Bernanke in 2009
Ben Bernanke has overseen the greatest expansion of the Federal Reserve’s balance sheet in its history, pouring trillions of dollars into Wall Street firms at roughly zero interest rates.
His generosity, however, has a limit.
Sen. Jack Reed (D-R.I.) followed Bennett and pointed out that “there’s only really two ways you can deflect this deficit, and that’s either by cutting expenditures or raising income taxes or other forms of taxes.”
Reed asked him if he could think of other ways, but Bernanke returned to entitlement money as the way to balance the budget.
“Willie Sutton robbed banks because that’s where the money is, as he put it,” Bernanke said. “The money in this case is in entitlements.”
There’s also money at the very top of the income ladder. Reed asked if Congress would be wise to tax some of it. Full of suggestions when it came to cutting entitlements, Bernanke was suddenly overtaken by a bout of policy modesty.
“Would you take taxes off the table?” Reed asked.
“Those decisions are up to Congress,” Bernanke said.
#32 by Richard Warnick on November 30, 2012 - 8:50 am
No need to pretend. The only plan on the table right now is the President’s proposal. Republicans seem unable to produce their own. They just sit there and complain that Obama didn’t make any concessions! This time the Dems aren’t going to negotiate with themselves.
#33 by Richard's Fact Checker on November 30, 2012 - 9:04 am
That isn’t an offer. It was a joke. And the joke is on us. It proves that Obama lied since he offered no reductions in the growth of spending that he has been promising. Oh well, over the cliff we go and it will be Obama’s fault.
Even the LA Times says so:
http://www.latimes.com/news/opinion/opinion-la/la-ol-obama-fiscal-cliff-gop-taxes-democrats-spending-20121128,0,5200457.story
#34 by Richard Warnick on November 30, 2012 - 9:14 am
brewski’s arithmetic:
$340 billion = nothing. New York Times:
I think it’s fair to say that $340 billion in cuts offered by the Obama administration is $340 billion more than the Republicans have offered so far. They are still trying to play the silly game of “Dems want to cut Medicare, not us.”
#35 by cav - FAT checker on November 30, 2012 - 9:25 am
On Election Day, The Boston Globe reported, Logan International Airport in Boston was running short of parking spaces. Not for cars — for private jets. Big donors were flooding into the city to attend Mitt Romney’s victory party.
Krugman
#36 by cav - FAT checker on November 30, 2012 - 9:35 am
“The money, in this case, is in entitlements”
This is clearly NOT the case. The money, in this case, is in the pockets of the .1%, and ‘Defense’. And that is precisely from where it should be withdrawn!
#37 by Richard's Fact Checker on November 30, 2012 - 10:25 am
There are $10 trillion in deficits over the next 10 years. Obama asks for $1.6 trillion in tax increases, asks for more stimulus spending, and then throws in $340 billion in savings. So he is just $8 trillion short.
#38 by Richard Warnick on November 30, 2012 - 10:40 am
And the Republican plan is…. ?
#39 by Richard's Fact Checker on November 30, 2012 - 11:36 am
GOP passed a budget. Democrats jerked themselves off. End of story.
#40 by cav - FAT checker on November 30, 2012 - 12:18 pm
Fewer shopping days til the Mayan ‘end-of-story’ than til Christmas.
brewski seems to be chomping at the bit.
#41 by Richard Warnick on November 30, 2012 - 1:09 pm
There is no Republican plan. Ryan’s so-called “budget” is merely an outline, it wouldn’t reduce the deficit, and few would have voted for it if they thought it was going to do anything.
Speaker Boehner won’t specify any budget cuts or say which tax deductions he wants to eliminate. He refuses to consider letting the Bush tax cuts expire for the wealthiest Americans. Which is going to happen at the end of the year anyway.
If they were smart, the House Republicans would vote for the Senate-passed bill giving 98 percent of taxpayers an extension of the Bush tax cuts. How could Grover Norquist say no to that?
But no, the Republicans are working for a handful of greedy rich people who think the rest of America is here to serve them. We’ll see how that plays out in future elections.
#42 by Richard's Fact Checker on November 30, 2012 - 1:44 pm
http://www.cnn.com/2012/03/29/politics/house-gop-budget/index.html
And the Dems? Nada.
#43 by Richard Warnick on November 30, 2012 - 1:55 pm
The President’s Budget for Fiscal Year 2013
#44 by Richard's Fact Checker on November 30, 2012 - 2:41 pm
Thank you for proving my point for me. I couldn’t have done it without you.
Your link to the President’s Budget shows an $8.7 Trillion deficit over 10 years. After 10 years, as the President’s Secretary of the Treasury said, deficits skyrocket out of control.
From the President’s Budget:
“Beyond 2022, however, the
fiscal position gradually deteriorates mainly because of
the aging of the population and the high continuing cost
of the Government’s health programs. By 2030, the deficit
is projected to be 4.5 percent of GDP, and by 2040 it is
nearly 6 percent. The deficit continues to rise for the next
75 years, and the publicly-held debt is also projected to
rise persistently relative to GDP”
“health care costs are likely to continue
to rise faster than inflation as the population ages,
posing a danger to long-run budget stability.”
“With fewer
workers to pay the taxes needed to support the retired
population, budgetary pressures will steadily mount and
without reforms, trust fund exhaustion is projected by the
Social Security Trustees to occur in 2036.”
“The country
also faces the challenge of reforming the tax code to make
it fairer and simpler and to provide sufficient revenue to
meet long-run commitments. Resolving the long-run fiscal
challenge will require a comprehensive approach, one
that restrains spending growth but also addresses the
sufficiency of the tax code. The 2013 Budget includes several
proposed changes to the tax code that would close
loopholes and eliminate tax breaks for special interests.
It also calls on Congress to undertake comprehensive tax
reform to both lower tax rates and generate new revenues.”
“Because of these pressures, further cost-reducing measures
or additional revenues are needed to stabilize the
budget outlook in the long run.”
“the deficit and the debtratio
begin to rise again in the period after 2022, with the
debt-to-GDP ratio eventually far exceeding its previous
peak level reached at the end of World War II.”
In other words, according the The President’s Budget, we’re fucked and he is just kicking the can down the road.
#45 by Richard Warnick on November 30, 2012 - 2:53 pm
I think President Obama’s plan should be scrapped in favor of letting all the Bush tax cuts expire. To that I would add a millionaire’s tax and a financial transaction tax, plus Pentagon budget cuts.
However, Obama does have a plan and the Republicans do not. Unless you count Ryan’s magic asterisk.
#46 by Richard's Fact Checker on November 30, 2012 - 4:21 pm
The analysis you link is incorrect. The Budget as passed by the House was scored by the CBO and produces tax revenues which were higher than in the Clinton era.
By the way, on MSNBC this morning your good friend Ezekiel Emmanuel said that Medicare needs to be totally reformed and spending drastically reduced. This he ways needs to come from completely changing how health care is practiced, delivered and paid for. Too bad the fake health care “reform” didn’t include his ideas.
#47 by cav - FAT checker on November 30, 2012 - 7:53 pm
Another tip for richies…
The pellet with the poison’s in the vessel with the pestle; the chalice from the palace has the brew that is true.