Again, the media consistently fails to explain the tax code…
Because of this, many feel like comedian Victoria Jackson who recently stated on Fox News that her motivation is gone because Obama will punish her if she is successful.
I will make me up a simple tax bracket example to demonstrate.
Poor = $0-$30,000 = 10%
Middle Class = $30,001 -$100,000 = 25%
Rich = $100,001-Warren Buffet = 35%
So…
If you make $30,000, you are in the first tax bracket, so you pay $3,000 in taxes…keeping $27,000. but most do not want to be poor and want to have cable tv, so they work harder to get into next bracket…
If you make $100,000, you are in the second tax bracket, so she things you pay $25,000 in taxes…keeping $75,000.
But here is the mistake. They feel that Obama is a socialist that hates rich people…hates success…loves the poor and the lazy, so he will punish you if you dare succeed. So in Victoria Jackson’s head, she believes that as soon as she makes another $1, she is in the rich tax bracket…punished….more taxes…less motivations because now she is the 35% tax bracket so she things she now owes $35,000.35…only keeping $65,000.65…a loss of almost $10,000.
Can someone please mention the phrase marginal tax rate? And then explain it.
In a simplified example, everyone pays the same tax rate for all income earned in the first tax bracket. Any money earned above that gets taxed at the next tax rate. The new and higher tax rate is not applied to all of the income…only the amount above the previous tax bracket…
Therefore, you still have a motivation to be rich…
15 March 2009 at 9:20 pm
This is so excruciatingly frustrating. j and I ate breakfast today is a small diner and while we were eating the retired mother and her son (roughly 30-40 years old) were debating Obama’s tax/budget plan. The son obviously got his talking points from the New York Post he was holding. Now, I’m not saying that I agree with all of Obama’s plans, but to act like restoring the tax rates back to what they were during the 90s would totally stifle innovation is a crock of shit.
We’re talking about the salary you make over $250k being taxed at 39% vs the current 35%. For historical reference, see the max tax rate here: (http://www.truthandpolitics.org/top-rates.php). Really, since WWII, we aren’t exactly that high. Also note that in the 90s, there was plenty of entrepreneurial activities and the creation of wealth for more than just the top tax bracket.
I always hate these arguments, because the calls for lower taxes never ends, they never say what the ideal tax rate would be. One assumes it would be zero. The son also refused to acknowledge the need of the state to provide public goods (ie roads, electrical grid, etc) as no single private industry has the incentive to make these investments. Not wanting to get into an argument, we just tried to make conversation ignoring them, but I couldn’t help but wish I had my favorite MBA-Lawyer-Middle Blocker there to shoot him down and break his glasses.