Many writers with basic numeracy skills have already commented on the silliness of rich people who have no idea how the tax system works, but these commentators fail to appreciate one essential fact: the dumb, affluent, whiny Americans featured in this NY Times piece are beacons of hope for millions of their fellow citizens who suck at math but want to be rich. It's quite possible to be both…
Kristina Collins, a chiropractor in McLean, Va., said she and her husband planned to closely monitor the business income from their joint practice to avoid crossing the income threshold for higher taxes outlined by President Obama on earnings above $200,000 for individuals and $250,000 for couples.
Ms. Collins said she felt torn by being near the cutoff line and disappointed that federal tax policy was providing a disincentive to keep expanding a business she founded in 1998.
"If we're really close and it's near the end-year, maybe we'll just close down for a while and go on vacation," she said.
Marginal tax rates have never worked like this, don't work like this now and won't work like this even after Barack Obama has introduced sharia socialism by executive fiat into the tax code. When tax rates on the over-$250,000 per year bracket are raised, the new rates apply solely to income over that amount. If you earn $260,000 dollars, $10,000 will be taxed at the higher rate, while the first $250,000 will be taxed at lower rates. This means it always pays to work more, as long as you value the extra money more than leisure time.
This also means that a reducing the tax rates on incomes below $250,000 is also a tax cut for the rich. That's because the wise and munificent job creators who who earn $1,000,000 a year have also earned $250,000 and must pay taxes on that amount before reaching the marginal rates that apply to higher incomes. Payroll tax holidays? Also tax cuts for the rich.
But the bottom line: marginal tax rates, ignorance and wealth have all co-existed for a long time, so there's hope for the financially illiterate to strike it rich yet.
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Tags: Money, New York Times, Taxes